Was the stimulus passed by the House even big enough?

[Undercurrent]

Reading what many of the leading economists are saying about the scale of the problem, I've grown increasingly anxious that the stimulus, even the House bill as passed before it was filleted by the Senatorial long knives, is to way small to do the job.




...It's a matter of basic math, says economist Dean Baker of the Center for Economic and Policy Research. The economy is currently losing - annually -- $450 billion in housing wealth, $650 billion in consumer spending and $150 billion in commercial real estate value. "You're talking about a gap on the order of twelve-hundred-fifty billion dollars, and we're trying to plug that with four-hundred-something, so we've got a long way to go," Baker says. (The stimulus package of roughly $800 billion doles out spending and tax cuts over two years.)

Galbraith, too, says that demonstrating that the stimulus is too small is a matter of basic math. The $400 billion it will inject into the economy each of the next two years is equal to about two to three percent of GDP, he noted. But the economy is falling at a much faster rate, projected at eight percent by the CBO this year and 14 percent over two years - and that projection, again, doesn't account for the financial collapse...

If it's too small, how is it, then, that economic models like the Congressional Budget Office's show that the economy will turn around sometime in 2009 or 2010?

The harsh reality: they're just guessing. And they're guessing based on economic models, says Galbraith, that have been built post-World War II and don't take into account the collapse of the financial sector. Instead, they assume the credit markets will be there to help ease the nation out of the downturn...

more... http://www.huffingtonpost.com/2009/02/09/is-stimulus-too-small_n_165076.html

[Birthmark]

1. Repeating myself from another thread:

We cannot fix the economy. We *CAN* soften the blow for the millions that will suffer or are now suffering from this economic catastrophe. That is what we should be concentrating on.

Let the banks shift for themselves. Call in the TARP money and distribute that to the poor and middle class. That will do far, far more good.

[Skittles]

2. no

[elleng]

3. More will have to come later,

as we see how the first bill works and how the people respond to the idiocy we've seen on The Hill.

[Baikonour]

4. According to Krugman, it should have been much bigger.

Even more spending, and even less tax cuts. This would have, of course, met strong republican opposition but getting 3 votes from it would not have been difficult and the end result would have been a much stronger "compromised" bill than we see today.

[leveymg]

5. 4-5 trillion more in as many years may do it, maybe.