MF: I do expect it to help, but let me be clear about why it’s not like moving water from one end of the pool to the other, or more accurately, why it is not a way of making the economy grow under all circumstances. If the economy is fully employed and growing at a normal pace, 3.5 percent, with unemployment under 5 percent and no expectation of a downturn, then aggregate demand is not the problem. Then, the only way to get the economy to grow more is to have more investment in capital equipment, people working harder, more innovation, and so on. And you can’t do that by simply giving money back to taxpayers to spend more. So, the “spend more” approach to increasing economic activity is not about long-term growth. What it’s about is offsetting the risk of an economic downturn.

FP: So, how do you think a U.S. economic slowdown would affect booming Asian economies such as India and China? Do you think these emerging-market economies could really pick up the slack, as some people have suggested, if U.S. demand slows? Or are they so tied to the United States that an ebb tide for the U.S. economy would lower all boats?

MF: I don’t think that India and China are going to be adversely affected by a slowdown in the United States, if it occurs. Now, that’s different from having them pick up the slack, to use your phrase, and provide aggregate demand for the rest of the world. I think those two ideas get confused sometimes when people talk about decoupling. India does not depend on exports to the United States. Similarly, I think the direct impact on [U.S.] imports from China would not be that large. China exports a lot, but its net exports (when you net through how much it imports in order to reexport) are not so much a driving force in their economy, and they have other ways of picking up the slack domestically. In fact, they’ve been worried about the fact that their economy has been growing too fast, and they’ve been looking for ways to dampen it. If their exports slow down, they will shift toward more domestic spending. That’s a very good thing for the Chinese economy and may make for a structural change that will reduce the future trade imbalance between China and the United States. So, I don’t think the Chinese should be that worried about a U.S. recession.

FP: I think it’s fair to say that most Americans would be worse off as a result of a U.S. economic slowdown. But who would you say are the likely winners from a U.S. recession?

MF: (Laughs.) That’s a tricky question. Likely winners from a U.S. recession … um … (pause). There are not many winners in a situation where income is falling and sales are falling and profits are falling and so on. So, the winners, if there are winners, are going to be financial investors who have seen this recession coming and who have in effect bet financially on an economic downturn—they’ve sold stock short.

Martin Feldstein is professor of economics at Harvard University and president and CEO of the National Bureau of Economic Research. He was chairman of the Council of Economic Advisers under U.S. President Ronald Reagan.