In his column last week, New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman laid waste to those who argue that he's not critically assessing Obama administration programs. He offered a cogent critique of the U.S. Treasury's tardiness regarding the banking system fix. Either temporarily nationalize those banks that are clogging the system, buy the toxic assets at unsubsidized prices, or announce some other market-valued removal plan to unclog the system, but let's put this train in motion, Krugman said, in so many words, to get to the root of the matter: We need to get credit flowing freely to facilitate commerce.
This week, Krugman offered another critique of the Obama administration, but it's one the economic conservatives won't like to hear. That's correct: The first fiscal stimulus package was too small, and Congress will likely have to pass another, large one.
Of course, those who are simply philosophically opposed to federal government spending represent elected public officials who can't be swayed, so don't look for the administration or Congressional Democrats to try to recruit their support.
The case for 'Fiscal Stimulus - The Sequel'
But for those who can look objectively at the data points, the evidence is fairly convincing. The unemployment rate is already at 8.1% -- the average the administration had forecast for the year, Krugman said. Employment has also fallen as much as it did during the 1981-82 Reagan recession, which was the worst recession since the Great Depression. Moreover, the economy is losing jobs at a five-hundred-thousand-a-month clip. If that continues, well, let's just say it won't be a pleasant time for the stock market and the overall mood of the nation will not be the preferred one.
Another concern for Krugman: a possible significant decline in President Obama's approval rating. A lack of improvement in the economy, due to a too-small stimulus and a tardy toxic asset removal plan, could lower Obama's public approval rating to levels that may make it hard to pass a second stimulus by the time Krugman says it will be needed: September.
The solution? Pass a second stimulus package and get the banking fix in motion -- two strong actions the public favors -- pronto, Krugman says. And don't wait for Republican approval: it's not up ahead. If the economic conservatives and Congressional Republicans met Dorothy and The Scarecrow on The Yellow Brick Road, they would tell the pair that the way for Dorothy to get to back to her home in Kansas and for The Scarecrow to get a brain would be to cut taxes on upper income groups.
Economic Analysis: Although the Obama administration faces a mini-tussle with Congressional Democratic Leadership on the fiscal 2010 budget (on charitable deductions, for example), the budget will pass, with most of it to the administration's liking. That will create time and space to pass a second fiscal stimulus package, should it be needed. The view from here argues it is needed, in that the first fiscal stimulus was too small. Still, given the current political climate, Congress will work on other issues (energy, health care) and give the first package time to take effect (2-4 months). If the economy shows signs of a recovery, Stimulus II will be shelved. If not, look for Democratic support to build for a second stimulus package.
Of course, those who are simply philosophically opposed to federal government spending represent elected public officials who can't be swayed, so don't look for the administration or Congressional Democrats to try to recruit their support.
The case for 'Fiscal Stimulus - The Sequel'
But for those who can look objectively at the data points, the evidence is fairly convincing. The unemployment rate is already at 8.1% -- the average the administration had forecast for the year, Krugman said. Employment has also fallen as much as it did during the 1981-82 Reagan recession, which was the worst recession since the Great Depression. Moreover, the economy is losing jobs at a five-hundred-thousand-a-month clip. If that continues, well, let's just say it won't be a pleasant time for the stock market and the overall mood of the nation will not be the preferred one.
Another concern for Krugman: a possible significant decline in President Obama's approval rating. A lack of improvement in the economy, due to a too-small stimulus and a tardy toxic asset removal plan, could lower Obama's public approval rating to levels that may make it hard to pass a second stimulus by the time Krugman says it will be needed: September.
The solution? Pass a second stimulus package and get the banking fix in motion -- two strong actions the public favors -- pronto, Krugman says. And don't wait for Republican approval: it's not up ahead. If the economic conservatives and Congressional Republicans met Dorothy and The Scarecrow on The Yellow Brick Road, they would tell the pair that the way for Dorothy to get to back to her home in Kansas and for The Scarecrow to get a brain would be to cut taxes on upper income groups.
Economic Analysis: Although the Obama administration faces a mini-tussle with Congressional Democratic Leadership on the fiscal 2010 budget (on charitable deductions, for example), the budget will pass, with most of it to the administration's liking. That will create time and space to pass a second fiscal stimulus package, should it be needed. The view from here argues it is needed, in that the first fiscal stimulus was too small. Still, given the current political climate, Congress will work on other issues (energy, health care) and give the first package time to take effect (2-4 months). If the economy shows signs of a recovery, Stimulus II will be shelved. If not, look for Democratic support to build for a second stimulus package.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
3-12-2009 @ 4:35PM
Kenny Hatcher said...
This whole stimulus bill that was pushed through, and all of this new spending is ridicules. It does nothing to create long term jobs. These are all short term projects that they want to do. What are all of these people working on these projects going to do once everything is fixed? They will be jobless without any where to turn and the economy will go back down. If we are going to throw money around, lets throw some into creating jobs outside of the government. One job resource that could use a jolt of life is our manufacturing industry. I was reading articles over at americanboom.com about how much of this problem could have been avoided if we had not outsourced all of our manufacturing to China. We need to stop relying on the government to bail us out and start bailing each other out. If we support companies that employ Americans then maybe they will not move to China.