The economy still stinks, and there are few signs of improvement these days. The challenges appear to be largely political in nature at this point since, as Paul Krugman has been pointing out for some time we know how to fix things we just seem to lack the will.
Krugman has a new book out summing up his arguments on how to end the current depression and gave a good talk at Politics & Prose on the issue. He also wrote this summation of the book for the NY Review of Books which serves as a cliffs notes of sorts...
The truth is that recovery would be almost ridiculously easy to achieve: all we need is to reverse the austerity policies of the past couple of years and temporarily boost spending. Never mind all the talk of how we have a long-run problem that can’t have a short-run solution—this may sound sophisticated, but it isn’t. With a boost in spending, we could be back to more or less full employment faster than anyone imagines.Read the whole thing, if you have time give the book a look as well, and if you aren't into reading P&P is nice enough to provide recordings of most of their author talks.
But don’t we have to worry about long-run budget deficits? Keynes wrote that “the boom, not the slump, is the time for austerity.” Now, as I argue in my forthcoming book*—and show later in the data discussed in this article—is the time for the government to spend more until the private sector is ready to carry the economy forward again. At that point, the US would be in a far better position to deal with deficits, entitlements, and the costs of financing them.