Economist: Obama Stimulus Not Enough

Nobel Winner Paul Krugman Tells Face The Nation President-Elect's Stimulus Plan Not Big Enough

(CBS)  Speaking on CBS News' Face the Nation, Obama senior White House advisor David Axelrod noted that he wants Congress to work with "deliberate speed" on an economic stimulus bill in the new year. “We’ve talked about a package from 675 billion to 775 billion,” Axelrod said, adding “one thing we, I think everyone, agrees on, economists from left to right, is that we have to do something very large.” He said a stimulus package by January 20th "would be great" but would not commit to whether that is a realistic goal.

However, Nobel-winning economist Paul Krugman said he is concerned that the stimulus package is not big enough.

"I'd like to see it bigger." Krugman said. "I understand that there's difficulty in actually spending that much money, and I--they're also afraid of the--of the T word. They're afraid of a trillion dollar for the two-year number. But you know, the back of my envelope says it takes roughly 200 billion a year to cut the unemployment rate by 1 percent from what it would otherwise be. In the absence of this program, we could very easily be looking at a 10 percent unemployment rate. So you do the math and you say, you know, even these enormous numbers we're hearing about are probably enough to mitigate but by no means to reverse the slump we're heading into. So this is--you know, I--they're thinking about it straight."

"I liked what Larry Summers wrote in The Washington Post," Krugman added. "I think he was getting it right that the risks of being too small are much bigger than the risks of being too big. Nonetheless, I am actually concerned that this thing is not going to be really big enough."

Krugman chimed in on comparisons between the present economic situation and the Great Depression and said, "the only reason that we're not headed for Great Depression II -- at least I don't think we are -- is that we think we learned a few things since then." He then added, "but this is big stuff. This is the worst thing, you know, in two life times."

[VegasResident]

I saw an interesting article today on CNN that the problem with the economy is that the govt is treating it like the Depression, which was a problem with liquidity and continue to pump in cash. However liquidity in Banks has risen from 7 billion to over $750 billion because they refuse to lend the money to each other or consumers, businesses, etc.

This is a crisis in confidence and not liquidity.

this is why as consumers and businesses, even though banks are getting tons of cash we are still seeing our credit card interest rates go up, the inability to get small business or personal loans, etc.

Until confidence is restored at the bank level and they start loaning out this horded liquidity, we will not see an end to the recession.

If they start loaning, then businesses can hire. If businesses can hire, then people will spend and the economy will be in the right direction.

[alarchdu]

If Obama just gave $1000 to everyone in the US, a few who didn''t need it would get it. But the $300 billion would be spent, on mortgages or consumer goods, but not on investments. It would trickle upwards to the banks, most would come back to the IRS as taxes within a year. It would boost employment faster than Krugman''s suggestions. Of course, it would reduce the control of the money people. That is why it will not be done.

[wardoglrs]

Masterful and arrogant wealth, created largely by Government protection of its profits, not content with its domination and influence within a single party, had sought to corrupt them both, and to that end had insinuated itself into the primaries, in order that no candidates might be nominated whose views were not in accord with theirs." %u2018Colonel%u2019 Edward Mandell House in ''Philip Dru: Administrator'', circa 1912

"When one gets in bed with government, one must expect the diseases it spreads." %u2013 Ron Paul

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. %u2013 Winston Churchill

[noloyalisti]

TheMajority1 - Ah, another line of wisdom from the not-so-silent minority. You were most likely a King George Butch supporter. And would have supported King George against the American patriots during the Revolution.

[noloyalisti]

As I have been saying for years, we should organize boycotts and general strikes before we have NO LEVERAGE left. This who economic system for, by and of the big corporations is out of control. I mean, what did we expect to happen. Fascism happens!

[samthetvcat]

---"The best option might be similar to the technology boom"---
Posted by homespunlady

Or maybe it''s more like somebody who dreams of ''making it big'' with a rock band who plays for tips every night in smoky bars off the beaten path, convinced he''s magically going to make it big one day and prove all those naysayers wrong. Only it''s been 8 years and he''s a dad now with family responsibilities and it''s an awfully big gamble to forego ''settling'' for a better paying job to instead buy on credit in the hopes that the deficit spending''ll all pay off once he has that breakthrough.

Team Barack doesn''t say enough that I can''t tell what their thinking is - is it that they''re just focused on turning the numbers around and THEN they hope to make more substantive changes, do they think it''s more politically advantageous to not make substantive changes, or are they just holding on to a pipe dream because they don''t want to give up hopes of glory?

I''m assuming it''s the latter, but hopefully that''s a mistaken assumption - I think most people would rather have the good paying manufacturing jobs in the here and now then keep buying on credit and holding out hopes for lightning to strike in the future . . .

[assemblyofso]

Did the media help pick up the tab on the Boeing 767 Obama chartered to take his familiy to the islands?
The reporters slammed Palin for her wardrobe. Where is the outrage over this type of wasteful spending. Is he going to send Gore a check for carbon credits?

Obama has one hell of an ego.

Ronald Reagan had a vision of America. Franklin Roosevelt had a vision of America. Barak Obama has a vision of Barak Obama.

[samthetvcat]

---"The best option might be similar to the technology boom"---
Posted by homespunlady

I think that''s like hoping to win the lottery, or waiting for Godot . . . people even after 8 years of declining incomes seem to still be holding out hope for the next ''technology boom'' that''s going to prove that our free trade relationship with China was ''progress'' because we''ve evolved into an economy of information service workers . . . is the thinking that Bush just didn''t allow that to happen and that Barack can make it happen, because that seems to me an awfully big expectation for him to fill . . .

[samthetvcat]

---"Wow! I''''m impressed with all the well thought through ideas and the polite lack of personal attacks and name calling."---
Posted by homespunlady

A lot of people have analogized support for unchecked deficit spending without a plan to reform to being in denial about a problem with alcohol - you know how alcoholics apparently can deny that they''ve been drinking even when they''re surrounded by empties because they''re delusional . . .

Great observations punlady! :D

[themajority1]

getting away with it before their puppet W leaves office.
--------------------------------------------------------------------------------Posted by homespunlady

And YOUR puppet remains that of ignorance and intolerance.

[likeitis5050]

It''s almost ''show time''....that ''put up or shut up'' day that everyone is waiting on in January. Of course if it falls short of being what was promised we have 65 million, including the press, for now, who will back off and allow for progress at a much slower rate....even though this puts 90% at risk for going under a third time. This is a scary time for anyone willing to step up to the plate...but on the up side...the tiniest bit of progress is going to launch Obama into the realm of ''most successful President in all of American history''...not that he won''t be granted that title anyway...by hook or crook. For someone with so much on his plate from day one...he stands the easiest chance of leaving office with an A+...good news for the Jesse Jacksons who follow him.

[swin5]

This guy wants to borrow one trillion dollars to stimulate the economy. You can not borrow your way into prosperity. And this guy won a Nobel prize. Nobel prize my x@#. Where do they get these guys?

[homespunlady]

Ironic really since the only ones that have anything to fear are the ones currently raking in the massive amounts of federal TARP WELFARE while the REST of the people in this nation are being told their pensions are gone (raided by TARP welfare recipients), they are losing their JOBS as the TARP WELFARE is being used to pay off derivative GAMBLING DEBTS so those recipients don''t have to give up THEIR lavish lifestyles. THOSE are the people that squeal the loudest and hire others to squeal even louder FOR them because it would be "devastation" for them to live in a Ranch house Subdivision alongside their "workers" like the business owners of the 60''s did and lose their SERVANTS.

Then there is the disinformation that it''s just a bunch of LAZY, STUPID, POOR people that caused this problem.

Sorry, the POOR don''t have a fraction of the economy large enough now to make that kind of effect - except that they with their "easy credit" did delay this financial reckoning and face a lifetime of indentured servitude to the rest of the "Madoff style Ponzi artists that are stealing the last of the economy and getting away with it before their puppet W leaves office.

[homespunlady]

There are hints that Obama may move to narrow that Wealth Gap but he''s cautious and from all the uproar over him even mentioning the phrase "spread the wealth" I''m NOT surprised that he''s stopped and may be maneuvering around that brick wall of fear.

The truth is that in the 60''s that gap was there but about a TENTH of the size of what it was in 2005 and probably closer to a twentieth the size it is today.

THAT is what stopped the FLOW of money and printing more only DILUTES but does not change the ratio or flow.

Until that ratio changes we will continue down this path of spiraling job losses leading to less buying leading to more job losses.

War is "shock Therapy" that has sort of worked in the past but we''re war weary and this option too has been misapplied enough to become a useless choice as the nation(s) that might be useful are already prepared to counter that tactic.

The best option might be similar to the technology boom - a hybrid of "patriotic" volunteer standard lowering (WWII style Victory garden/recycling) by the ultra-wealthy compensated by an overall national wealth gap closing that might keep revolt from their doorsteps. It might work since many of The truly greedy left the country already with their ill-gotten gains.

[homespunlady]

Wow! I''m impressed with all the well thought through ideas and the polite lack of personal attacks and name calling.
Machineguy in a much earlier post pointed out that war as a solution as some suggest merely REMOVES COMPETITION is spot on. It also destroys necessary assets and lowers the "acceptable" standard of life so later times seem better as that standard "rises". Everyone prefers a "rising standard of living". The Chinese are having that now so they are less likely to revolt.
A dropping standard does just the opposite and no matter HOW HIGH it was before - say dropping from McMansion living to say the "middle class" standards of the "good old days" of the 60''s will have a lot of Americans screaming bloody murder if the entertainment industry doesn''t divert them.

I still stand by my warnings that we''ve passed the tipping point for a Depression size economic fall based on the HUGE and growing Wealth Gap in this nation and so far that''s what we''re getting.

The Bush moves to WIDEN that gap by denying job creating industries help while further lining the pockets of HIS CRONIES is a Titanic Style steering job if there ever was one.

[samthetvcat]

---"Your right Sam. It is a long shot. But if we are blind to that, it doesn''t put us in a very good position. What should we do?"---
Posted by FLSunJnky

Sorry, I went to bed early when you didn''t respond right away :)

I guess my question to you in return is that if you owed somebody who you didn''t trust personally money then what would you do in real life? Wouldn''t you ask yourself whether you REALLY needed more money, how much, and how soon could you pay down what you already owe to get free?

It sounds like maybe you think it would be smart to borrow as much as you feel like in the moment and then worry about paying about it later if you had to ask (?)

[glenn_lewis]

AS AN ECONOMIST, I CAN TELL YOU THAT CONSUMER SPENDING WILL NOT RECOVER AS LONG AS LOWER AND MIDDLE INCOME AMERICANS GET NOTHING BUT "TIPS". SO FAR THE ONLY WINNERS ARE THE WEALTHY CORPORATIONS AND THEIR BILLIONAIRE MASTERS. OBAMA PORTENDS NOTHING NEW!

[irmcvet971]

It''s going to be extremely difficult digging out of this mess that''s for sure. We should, all of us, have learned something though. "Trickle Down" has yet again proven to be a total failure and the Republican Party WORSE than any of us remember.

[aztecdakota]

This stimulus *** talk is just that, *** talk. Everyone, especially big businesses, who alread have billions, are getting handed MORE BILLIONS!!! Excuse me, but it is the AMERICAN PEOPLE, who are fast approaching a Depression Era, they are the ones who are not getting any help. That original 850 billion, if given to the PEOPLE, would have helpt us get back on our feet. Nope it was given to outfits like car making companies, and the people can''t afford to buy any cars! Do you guys in Washington DC, have any brains? WE CANNOT BUY THE CARS, WE HAVE NO MONIES!!!!
NOW the govt wants to dig up, ANOTHER 850 Billion dollars to help big business, duhhhhh. Excuse me again US Government, that''s a real nice, EXPENSIVE, gesture, BUT us American People, still do not have the jobs nor the money to go buy all the stuff you are giving big business the money to make, WE ARE BROKE!! Do any of you government people get this message? Happy Holidays, I''m sure you are having them, you are all on government payrolls, you aint laid off, aint that nice?

[collis12]

Does it matter how much it is? It is clear that this money is going to those what know how to butter whose bread. Those of us who are just stuk in the to be gouged further category have once again been left in the "use at will seat". I wonder how long has been since any of the twelve or twenty candidates stood on astag and promised to look out for the middle class.