Japan has been in recession for 19 years now, and is going into a depression as we speak that will be much worse than the US. Part of the reason why Japan has been in a recession for 19 years is due to its social spending - you can't take on government debt without it having effects on the economy in the future. You see, that's the point that is missing here.
We want to copy that model?
Actually it doesn't matter, because if we even tried to do what they suggest (in terms of spending), the bond market would revolt.
Japan's GDP per capita in constant national currency has increased from 3.4 million yen at the top of the bubble in 1989 to 4.4 million yen 19 years later in 2008 (29% higher).
Its total GDP in constant national currency increased from 422 trillion yen to 565 trillion yen 19 years later in 2008 (34%).
In the years after the bursting of the bubble, Japan's output growth dropped from 5.2% in 1990 to 3.4% in 1991 to 1% in 1992 and 0.2% in 1993, but did not actually turn negative until 1998, suffering a 2% annual contraction and a 1% contraction in 1999 before returning to growth in 2000.
Sources for aboveI was wrong about Japanese unemployment; it never even touched 6%.
Ok, so looking at these numbers compared to the U.S. in the bubble years, they look horrible. But looking at them from the prospect of another Great Depression, they don't look bad at all. I'm not saying that a Japanese scenario is desirable for the US or that the two are comparable; however, it's certainly desirable compared to a depressionary contraction.
And Japan has a debt to GDP of 180%, and no bond market revolt. While once again I don't think the situations are comparable (Japan had a higher savings rate and a positive current account), no one can predict whether the bond market will revolt or what policy actions exactly will prevent it.
