Krugman on stimulus: Too Little of a Good Thing

[ProSense]

Too Little of a Good Thing

By PAUL KRUGMAN

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

And the really bad news is that “centrists” in Congress aren’t able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation.

About that good news: not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

The stimulus didn’t completely eliminate these effects, but it was enough to break the vicious circle of economic decline. Aid to the unemployed and help for state and local governments were probably the most important factors. If you want to see the recovery act in action, visit a classroom: your local school probably would have had to fire a lot of teachers if the stimulus hadn’t been enacted.

And the free fall has ended. Last week’s G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent. As Mark Zandi of Moody’s Economy.com put it in recent testimony, “The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery.”

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[Writer]

1. Dear Mr. President, will you please pay off my debts with the stimulus money?

My credit card and 20% of my mortgage? And how about my $20K in student loans?

Oh - and when I'm finished with my doctorate, give me a plum government job. And give Mr. Writer a 15% boost on his take-home pay to raise him back up to where he was before he had to accept another job with lower pay.

That would be the only way the stimulus would directly help us.

[SpartanDem]

2. There probably won't be another single stimulus package

but I would expect that you see more individual measures.

[ProSense]

4. Actually, this is was recently announced

small business financing

[AllentownJake]

14. That is TARP money

It isn't a stimulus package.

[liberal N proud]

3. How can he call it Obama's Stimulus?

When the GOP and Blue Dogs were through with it nothing looked like what Obama had originally proposed.

We need something that would create J-O-B-S!

One idea that would have done that, High Speed Rail, many people could have been put to work building the railway, building the trains and then operating the trains. JOBS!


That would have done more to stimulate the economy than providing a bonus for those financial institutions which are responsible for driving this Nation into hell.

[Cant trust em]

5. There is high speed rail funding within the stimulus.

California submitted their application a month or so ago.

[liberal N proud]

6. We need high speed all over the country.

[Cant trust em]

8. California is not the only one who submitted an application.

I'm just from there so it's the example I came up with.

http://online.wsj.com/article/SB125115017812354935.html

If you get a chance, I highly recommend CA's HSR website. It's beautiful.

[liberal N proud]

10. Oh, if they build the Chicago Hub, I will never fly to Kansas City again

That would be so sweet, sit back and glide along in comfort.


Of course leave it to America we will screw it up to the point where it is a royal pain in the ass to board and use the system, not to mention killing the project with the costs.

[Cant trust em]

11. Tell me about it.

I'd rather spend 2 1/2 hours on a train to get to LA instead of 1 1/2 hours on a plane.

I love trains.

[liberal N proud]

13. I was in Europe last week and had the opportunity to ride the TGV

Smooth, quite and comfortable.

Nothing like those tin cans of an airplane I had to ride to get to and from Europe.

[ej510]

7. China invested heavily into their infrastructure and green jobs. It is already paying oil for

them.

[Cant trust em]

9. You don't have to argue with me the power of infrastructure spending.

I love big capital projects.

[AllentownJake]

12. Make sure you read the whole article

"Worse yet, it’s far from clear that growth will continue at this rate. The effects of the stimulus will build over time — it’s still likely to create or save a total of around three million jobs — but its peak impact on the growth of G.D.P. (as opposed to its level) is already behind us. Solid growth will continue only if private spending takes up the baton as the effect of the stimulus fades. And so far there’s no sign that this is happening."

[ProSense]

15. That's why a link is provided. n/t