Everyone has an opinion about whether the economic stimulus package is too big or too small, but he's an opinion worth listening to: Robert Shiller.
As one of the few people to publicly call the internet and real estate bubbles for what they were, he has more credibility than just about anyone. And he's saying the stimulus package is too small and we need more if we are to avert another depression.
In an op-ed piece for Bloomberg, Shiller writes that "In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level."
What makes Shiller's column unique is that he advocates combining the stimulus package with efforts at making the economic system more fair. People are righteously indignant at seeing their money go into AIG's frontdoor and then out the backdoor in the pockets of the company's executives, but Shiller takes it a step further. He writes that "Compensation practices in the U.S. need to be made fairer. Vast earnings shouldn't go virtually untaxed, while the middle class is paying a sizable fraction of each extra dollar in taxes. Only then will the government have the mandate to restore our banking and securities institutions to their proper strong role in our economy."
It's certainly a valid point. But here's the problem: It's extremely doubtful the government has the resources or the competence to manage the largest stimulus package in the history of the universe. Can we really count on Uncle Sam to improve equality along with dispending the government cheese?
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Reader Comments (Page 1 of 1)
4-15-2009 @ 2:55PM
da governator said...
We're already in trouble as it is, and are very likely headed for a depression no matter how big the stimulus gets. Another stimulus will make the depression sting a little less, but will still only prolong the problem, not solve it.
4-15-2009 @ 3:25PM
JCH said...
There simply is no proof whatsoever to this silly notion that a stimulus prolongs a depression/recession.
The right side won the election. The other side seems determined to compound calamity with catastrophe.
4-15-2009 @ 3:57PM
da governator said...
JCH - How is this related to the election? I wasn't referring to who won the election; I'm glad Obama beat McCain. Keep in mind that all the bailout/stimulus actions started under Bush.
4-15-2009 @ 9:03PM
JCH said...
In the next year it is likely we will have to add capital to least a few big banks, and we will have to do a very large stimulus.
The Republicans are slamming on the brakes. It's possible none of them will vote to do either. There is also a movement of far left progressives who are nearly as delusional.
In eight years, TARP was easily George W. Bush's one shining moment as a leader.
4-16-2009 @ 1:01AM
ij70 said...
There will not be improvement until Mr. Obama reduces taxes.