Wag the housing market

at 12:03 PM ET, 07/21/2011

If you look at the housing sector, there’s evidence that the bust has now gone much further than the boom. As Karl Smith explains here, that means we should see a massive surge in housing sometime soon. But sometime soon can be a long time from now. So Paul Krugman has a proposal to speed things up a bit:

Suppose that Obama announces that we face a clear and present danger from Ruritania, and that to meet that threat we need immediate investment in roads and rail (to move troops, of course). The economy surges on the emergency spending — and newly employed men and women at last get to move out of their relatives’ basements. Home construction surges.
Then Obama apologizes, says that his advisers have learned that there is no such country as Ruritania, and cancels the program. But we still have the new roads and rail links; plus, the surge in housing demand is now self-sustaining, and the economy remains strong.
Of course, we could do all this without the Ruritanian threat; but we won’t.

 
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