are already near zero.) Given the urgent need to restore confidence and provide the maximum stimulus to reviving economic activity, the world's monetary authorities should continue to act together in a rapid and decisive manner.All three of the chief economic areas, including Japan as well as the United States and Europe, should also adopt expansionary fiscal measures. Strangely, the major European countries and Japan have been contemplating spending cutbacks, in the face of recession or sharp slowdown, to meet pre-planned budget targets. This would be akin to the Hoover economics that helped bring on the Great Depression in the 1930s, making a bad situation much worse. The arbitrary deficit ceilings targeted by Prime Minister Koizumi in Japan and the Stability Pact in Europe should be relaxed immediately to cope with the global crisis. The United States has already cut taxes modestly and will be increasing government spending to respond to the humanitarian and security implications of the terrorist attacks. However, we must not slip into our own brand of Hoover economics by regarding the fictitious Social Security "lock box" as a deterrent to deploying our large budget surplus. We should promptly implement a significant chunk of the cut in personal income taxes that has already been agreed for later years, or simply repeat the rebates of the recent past, injecting another $100 billion or so of purchasing power into the economy over the next few months.The success of such measures will be determined largely by their impact on the psychology and confidence of consumers and investors. These crucial intangibles will be steered importantly by developments outside the economic sphere, especially the effectiveness of our leadership in responding to the direct security effects of the attacks. But the impact of the economic steps themselves can be greatly enhanced if they are taken quickly, decisively and especially through a coordinated multi...
