Economists Martin Feldstein and Larry Hatheway, the latter chief economist at UBS AG (NYSE: UBS), say a large fiscal stimulus is needed to prevent a deep recession, Bloomberg News reported Tuesday. Feldstein wants a $300 billion package; Roubini said the package may have to be as large as $400 billion.
Also. NYU's 'Dr. Doom' Prof. Nouriel Roubini said that that without a large stimulus package, the U.S. recession could last as long as 18-24 months, with unemployment soaring above 9%.
Economist David H. Wang agreed that a large fiscal stimulus is needed, given current trends in consumer spending and business investment. "There is a major crater that has to be filled here. The consumer is in retrenchment mode, and business spending is pulling back. Trade activity is showing signs of sluggishness. Without a fiscal stimulus, macroeconomic conditions will continue to deteriorate," Wang said.
However, Wang said Congressional Democrats will have to structure the stimulus carefully, in order to get "the biggest bang for the GDP buck," -- and that may lead to the first tension of the new Democratic caucus.
"In addition to the stimulus's overall size, the stimulus should be geared toward cash-immediate programs like highway spending, other infrastructure projects, aid to homeowners for refinances, aid to states, and extending unemployment benefits," Wang said. "There may be pressure to support other programs, like education and renewable energy, but the danger in those is that they do not provide immediate stimulus for the economy, which is what we need."
Political / Economic Analysis: It's unlikely that lame-duck, sitting President Bush would sign a second fiscal stimulus package: there's about a 20-30% chance that he would. Just the same, post-Tuesday election, Democrats should hit the ground running and formulate a stimulus package so that it's good-to-go and ready for signing when the new president takes the oath of office in late January 2009.
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Reader Comments (Page 1 of 1)
11-04-2008 @ 3:28PM
The One And Only said...
Most likely YES A pak will be that long just to ride out a (365 days in recession) But of course more will be on the table, such as, maybe a special mortgage rate of 1% below or maybe even 2%? Maybe a $10k tax break for buying a home? Who knows... even provide dollars to larege businesses indirectly to hire people and the Government will pay a portion of their salaries? Hold you horses this will take a minimum of almost 2 years and then, maybe then, talk about a health plan but please government, not being self insured!!
11-04-2008 @ 3:31PM
The One And Only said...
Yes I know... what about extended unemployment benefits? Good for 1 year (I assume)