New York Times (NYSE: NYT) columnist Paul Krugman argues quite persuasively that the major problem with the fiscal stimulus package was that it was too small, given the financial crisis and the large economic crater the accompanying, pronounced recession created. Further, the fiscal stimulus' many benefits -- including substantial job retention in essential public services such as education -- are harder to see and not likely to translate into too much political gain for President Obama and Congressional Democrats, he said. That's consistent with a political science axiom -- often repeated by U.S. Rep. Barney Frank, D-Massachusetts -- that "Congress gets little credit or benefit for averting something." Indeed, retained jobs are hard to see, and the fact that a local public school system is is still operating with as many teachers is an accomplishment, but one that most American voters will take for granted, and not give Democrats credit for.
In other words, the fiscal stimulus package doesn't get much political credit, Krugman said, and that's a shame. Further, the stimulus package would have achieved much more from a GDP standpoint if, as Krugman recommended earlier in the year, it was considerably larger, say $1.1-$1.3 trillion in size,as opposed to the $786 billion package that was passed. Underscoring: the stimulus is working, but it's not accomplishing enough, due to its inadequate size.
Further, Krugman argues that a failure to increase stimulus at this juncture will be worse, in the long run, than doing nothing more: the increased debt burden implied by additional fiscal stimulus is dwarfed by the social and fiscal costs from the specter of high U.S. unemployment lasting for numerous years.
Fiscal/ Economic Analysis: Krugman hits the nail on the head, again. Meanwhile, Congressional Republicans' response to the stimulus this fall is the same as it was in the spring, and the same that it was in 2001, and in 1933 etc. Namely: the stimulus has failed, so it's time to cut taxes on upper income groups, cut spending, reduce regulation, and reduce the deficit. Doing so will enable the private sector to create million of new jobs the U.S. economy is short, the Republicans argue. However, there is little empirical evidence to support such an assertion: given sluggish demand in the U.S., companies are highly unlikely to increase payrolls at an adequate rate in the initial years of the economic recovery. The problem is not the supply of capital (which a tax cut on upper income Americans would increase) or a lack of places to invest, but demand (not enough Americans with jobs and adequate incomes). Hence, policy tactics must increase demand.
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Reader Comments (Page 1 of 1)
11-02-2009 @ 7:16PM
MyKisa said...
....spent too little...well government man, spend a lot more so we can be enslave 10 generations please....audit the fed now!
11-02-2009 @ 9:58PM
blablabla said...
The "Porkulus" Bill was too small ???....the writer must be from the "Planet of the Mind-Numbed Liberal Idiots"...
11-02-2009 @ 11:47PM
Iridium said...
Always good for a laugh. I think you need to paint a hammer and sickle on your car Joe.
The primary flaw of the stimulus package was that it was passed in the first place. THE GOVERNMENT CAN NOT CREATE GROWTH. IN ORDER TO CREATE A GOVERNMENT JOB ONE MUST BE DESTROYED IN THE PRIVATE SECTOR FIRST.
Government can only pay for jobs it creates by:
1) Higher taxation to generate revenue needed for payments
2) Increase the money supply by printing more dollars
Lowering taxes on the top income bracket did not create the problems. Removing regulations that prevented fraud created the problem. The failure of the SEC to stop corruption compounded the problem.
The best thing the government can do for the economy is to lower the corporate tax rate of any company under $100 million gross to 1%. Any corporation with a market cap above $1billion would see an increase in their tax rate to 50% of gross revenue. This would put an end to the mega corporation almost immediately. The government would then need to start the process of breaking up every company in the Fortune 500. That is the only way to return the economy to a level of sanity.
If you lower the taxes of a morally just business owner, an ethical owner. He will use the increase to help grow his company and spread the wealth to his employees. Instead we gave the ethical the shaft and rewarded the morally bankrupt in our society. Rather than use increased wealth to grow the economy, they used it to grow their own personal fortunes.
There are bad Republicans but the majority of the corrupt in our society, the ones at fault for the economic collapse and the creation of the state of elitism check the L box next to their political philosophy. Liberalism by its nature does nothing but breed corruption. When you have an attitude that anything is permissible and no accountability for actions, you end up with a morally bankrupt society.
True conservatives do not align themselves with anyone in the Bush family. The Bush family like any of the elite hierarchy stray far left of even the most liberal conservative ideals.
Liberalism and diversification has been the downfall of every empire in history. The growth of American liberalism/progressivism is what gave us the great depression. It was beat down for almost 20 years after WWII as the masses ascended to power once again. During the 1960s this cesspool of corruption began to rise again. For the next 30 years the progressives destroyed the middle class in order to return the mass of wealth back to the top 1% of society.
It is all there in black and white. The true history of the 20th century. We are just taught a different story, written and told by those who want to destroy middle class prosperity. They teach that the ideals that lead to prosperity for all are evil. The corrupt always blame the other side for doing the deeds they do themselves. Misdirection is the hallmark of any master deceiver.