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.

The market absolutists and economic conservatives in the audience will no-doubt abhor the thought, but there's still a quite plausible scenario in which the United States will need to pass another fiscal stimulus package. Here's why:

True, the U.S. economy appears to be heading toward recovery (assuming no additional collapses in financial institutions that create systemic risk), but the recovery may not be strong enough.

The Dow is set to end another week with a close above 8,000. In fact, the U.S. stock market is at a crossroad of sorts.

Right now, Dow 8,000 is not an issue: 5 consecutive weekly closes and roughly 400 points above 8,000 suggest that battle has been won by bulls.

Still, the bears will argue that the Dow is not that far above the psychologically-important 8,000 level and that this market is more than capable of wiping out that cushion in two sessions. Further, the bears also argue that while the Dow has closed above 8,000 for about a month, it hasn't been able to both make and sustain new highs above 8,600, then 8,800 and 9,000 etc.

China apparently will announce a new fiscal stimulus package in an attempt to jump-start growth in the world's third largest economy.

Chinese Premier Wen Jiabao is expected to announce "a new stimulus package" in his annual address to the nation's legislature, Li Deshui, ex-statistics bureau head told reporters in Beijing Wednesday, Bloomberg News reported.

The most sweeping fiscal stimulus in a generation is about to be signed into law by President Obama. It amounts to $787 billion and includes tax incentives, infrastructure projects, renewable energy developments, and payment to state and local authorities.

However, investors appear to be skeptical as indicated by the performance of the markets today for a variety of reasons:

• Some estimate that as much as 75% of the spending will not reach the economy until 2010.
• There are questions as to how many jobs in the United States will actually be created.
• People are uncertain as to how productive the spending bill will be and how much is actually just wasteful "pork."

The manager of the world's largest bond fund, PIMCO, has laid-out in unambiguous terms the problem facing the global economy in the quarters ahead: The U.S. and global recession will worsen -- with a "second wave" of turmoil -- unless governments increase fiscal stimulus and spending plans.

"The economic setback is still in its early stages," Koyo Ozeki, head of Asia-Pacific credit research at Pimco's Tokyo office, wrote in a report published on PIMCO's web site. "Any further decline in housing prices could accelerate the downturn, intensifying the pernicious feedback loop and possibly leading to a second wave in the financial crisis in the next six to 12 months."

One of the benefits, when you are a child of privilege growing up in or near the center of civilization, the capital of the world, is that you receive opportunities to experience the extraordinary.

For example, in addition to having two attentive parents, when you're a child of the fortunate you also have an uncle who, along with doting on his own three kids, doted on you like you were his kid. An uncle who worked in one of those banks in the city. A cigar-smoking, good-natured executive who just happened to personally know anyone-and-everyone who worked in The House That Ruth Built.

And suddenly, there you are as a third-grade student, two hours before they open the gates, and four hours before game time, sitting in your uncle's season-ticket, mezzanine box seats. Bathed in warm, spring morning sunshine, you squint your eyes under your baseball cap so you can see your heroes taking batting practice on the emerald-green field, with the art-deco frieze overhead and the sound of your idol's bat hitting the ball echoing through The House, the way Gehrig's poignant voice did generations ago during his farewell.

Two internationally known economists converged Tuesday on a common point regarding the link between stimulus and the U.S. economy's recovery -- but from different vantage points.

U.S. Federal Reserve Chairman Ben Bernanke, in a speech before the London School of Economics, said fiscal stimulus won't be enough to create a lasting recovery, unless it is accompanied by strong measures to stabilize the financial system.

Meanwhile, New York Times economist Paul Krugman underscored the need for both a large fiscal stimulus capable of providing an immediate boost to the economy and providing stimulus 18 and 24 months out.

In a CNBC interview Tuesday, Krugman underscored the need for a large fiscal stimulus -- a critical mass of fiscal stimulus, if you will -- to counteract the massive amount of stimulus taken out of the economy from declines in consumer spending, business investment, home price depreciation, constrained credit by banks, and stock market declines.

Krugman added that the $700-850 billion proposed fiscal stimulus package is too small. Earlier, in his column in The Times, Krugman said both shovel-ready and longer-term infrastructure projects were required to keep a lid on rising unemployment for the next two years.

Those investors, including market absolutists, who interpret the current economic state-of-things as just a typical downturn that a few tax cuts and some good, old-fashioned, free market-based supply side economics can solve, may want to stop reading the economic data points in the months ahead. At least, that's the view of one economist.

Nouriel Roubini, the once obscure New York University economics professor, who two years ago predicted the current global financial crisis and recession, said the worst is still ahead for the U.S. economy and for economies around the world.

"In the next few months, the macroeconomic news and earnings reports from around the world will be much worse than expected," Roubini wrote in a column for Bloomberg News, adding that the aforementioned will put downward pressure on prices of risky assets.

Further, Roubini said the U.S. economy will remain in recession through at least the end of 2009, with only a mild recovery starting in 2010 -- with GDP growth in the initial recovery year of 1%. For 2009, Roubini also forecasts continued recessions for the United Kingdom, euro zone, Japan and Canada. Russia will also fall into recession, as will Brazil, and China will experience a hard landing, with growth slowing to 5%, he said. India's economy also will slow substantially.

When you see Congressional and presidential administration officials commenting on fiscal policy, and Federal Reserve officials commenting on monetary policy, that's normal.

But when you see Fed officials commenting on fiscal policy -- something they never do -- that's not normal and is indicative of extraordinary times.

San Francisco Federal Reserve Bank President Janet Yellen has done the latter, stating in no uncertain terms that the U.S. economy needs a fiscal stimulus package to deal with its most serious economic slump in her career.

"The current downturn is likely to be far longer and deeper than the 'garden-variety' recession," Yellen said, in a speech. "If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now." Yellen said the global financial crisis and economic recession pose a serious risk of a prolonged period of stagnation.

"It's worth pulling out all the stops to ensure those outcomes don't occur," Yellen added.

The unique characteristics of the global recession will require large, but focused, fiscal stimulus packages by nations around the globe, so says a leading international policy and research group.

The International Monetary Fund said the drop in demand requires a substantial fiscal stimulus of at least 2% of world domestic product (WDP), coordinated action, with a focus on spending and targeted tax cuts.

Roughly 2% of WDP would amount to $1.5-1.8 trillion in fiscal stimulus, according to research compiled by economist Peter Dawson.

"Fiscal stimulus by nations may have to be larger than that, given how much the global economy has slowed during the past year," Dawson said. "The IMF forecasts a WDP growth rate of 2.2% in 2009 but it will probably dip below that, which would suggest a need for an even larger fiscal stimulus, probably upwards of $2.0-2.3 trillion for 2009."

The unique factor driving the need for the above? For the first time in the post-World War II era, all major regions of the world -- U.S., E.U., China/Japan -- are in recession at the same time, as are the emerging market economies of India, Brazil, and Russia, Dawson said.

To say current economic conditions are challenging the acumen of those who are charged with adjusting to them or planning for them would be an understatement.

And it goes without saying that in these volatile times, investors, like business executives, have to keep an eye on the near-term and the long-term.

The U.S. Federal Reserve has embarked on various liquidity measures, including quantitative easing. Meanwhile, the U.S. Treasury, as a result of $350 billion in deployed TARP money (and another $350 billion available to be deployed if Congress approves), has stabilized the financial system, at least for the time being. And if economic history is any indicator, look for the bulk of the Fed's monetary stimulus to begin to take effect within three months of deployment.

Meanwhile, the Obama Administration and new U.S. Congress are expected to act quickly on a large fiscal stimulus package that could pump an additional $800 billion into the U.S. economy over two years. And if economic history is valid here, as well, look for the fiscal stimulus to begin to take effect within six months.

There's been no change in the U.S. economy's pulse, according to the most recent GDP data from the U.S. Commerce Department.

The U.S. economy contracted at a 0.5% annual rate in Q3, the Commerce Department announced, in its final reading on the quarter. The rate was unrevised from the previous estimate, but it was the weakest quarterly growth rate since Q1 2001.

Economists surveyed by Bloomberg News had expected the economy to contract at a 0.5% annualized rate in Q3.

One danger sign for the economy: consumer spending, which accounts for 60-65% of U.S. GDP, declined at a revised 3.8% annualized rate in Q3, worse than the 3.7% annualized decline estimate announced earlier.

Economist David H. Wang said the final Q3 GDP was a wash. "GDP came in as expected, but we can see the clear, continued drop in consumer spending, which is indicative of a prolonged recession," Wang said. "So it's stimulate with glee, to make the recession flee."

This is one increase the American people would no doubt welcome with open arms.

President-elect Barack Obama, faced with a deepening U.S. recession, is expanding his fiscal stimulus package to achieve the goal of creating or saving 3 million jobs over two years.

Job growth is priority No. 1

Obama has made job growth his first priority, with the new target revised up from the previous 2.5 million-job target, said Christina Romer, Chairman-designate for Obama's Council of Economic Advisors.

Economist Richard Felson told BloggingStocks it's a good thing the Obama Administration is aiming higher.

"The 3 million job creation total over two years is warranted. In fact, it's modest when one considers that the U.S. economy has already lost 2 million jobs since the recession started," Felson said. "Job growth is at the core of reversing negative trends in corporate revenue, earnings, and of course home mortgage foreclosures."

Almost everyone who can get a quote in the newspaper or five minutes on TV has a solution to the global economic meltdown. These range from more financial regulation to stimulation of housing to government programs to create new jobs.

The head of the IMF put all of that into context with his opinion that spending by nations around the world to help get it out of a deeper and deeper recession has not been nearly enough. According to Reuters, "The IMF has called for fiscal stimulus -- higher government spending and temporary tax cuts -- worth $120 trillion, or 2 percent of global annual economic output, to fill the gap caused by slumping private demand following the credit crunch."

The view is, to a large extent, mirrored by the plan Obama has suggested. Spend money now even if it puts the government into a huge debt hole. But, does it make any sense?