Joseph Stiglitz sees stagflation on the horizon. If it does hit, what's a fiscal policy wonk to do? For those who think that a well-managed globalisation has the potential to benefit both developed and developing countries, and who believe in global social justice and the importance of democracy (and the vibrant middle class that supports it), all of this is bad news. Economic adjustments of this magnitude are always painful, but the economic pain is greater today because the winners are less prone to spend. Indeed, the flip side of "a world awash with liquidity" is a world facing depressed aggregate demand. For the past seven years, America's unbridled spending filled the gap. Now both US household and government spending is likely to be curbed, as both parties' presidential candidates promise a return to fiscal responsibility. After seven years in which America has seen its national debt rise from $5.6tn to $9tn, this should be welcome news - but the timing couldn't be worse. Stiglitz is more or less advocating a deficit-financed fiscal stimulus that targets the middle and lower class. People as different as Robert Reich, Larry Summers and Martin Feldstein have shown that they're open to a fiscal stimulus package, should the need arise. Question: when was the last time this country's leaders seriously considered offering a truly Keynsian stimulus package, one that was deficit financed and tried to raise aggregate demand by increasing the purchasing power of the lower and middle class? The Reagan and Bush stimulus packages targeted the wealthy, and as far as I know, Clinton wasn't in to deficits. Brookings is having an event in a couple days where fiscal stimulus will be discussed by some heavyweights in the economics world (with the notable exception, as is customary in discussions of macroeconomic policy, of anyone that can be credibly identified with the left). Should be interesting to see what possibilities they entertain and rule out.