Paul Krugman : The Real Story (The stimulus works, we need another round)

New York Slimes ^ | 09/03/2010 | Paul Krugman, Nobel Laureate /s

[SeekAndFind]

Next week, President Obama is scheduled to propose new measures to boost the economy. I hope they’re bold and substantive, since the Republicans will oppose him regardless — if he came out for motherhood, the G.O.P. would declare motherhood un-American. So he should put them on the spot for standing in the way of real action.

But let’s put politics aside and talk about what we’ve actually learned about economic policy over the past 20 months.

When Mr. Obama first proposed $800 billion in fiscal stimulus, there were two groups of critics. Both argued that unemployment would stay high — but for very different reasons.

One group — the group that got almost all the attention — declared that the stimulus was much too large, and would lead to disaster. If you were, say, reading The Wall Street Journal’s opinion pages in early 2009, you would have been repeatedly informed that the Obama plan would lead to skyrocketing interest rates and soaring inflation.

The other group, which included yours truly, warned that the plan was much too small given the economic forecasts then available. As I pointed out in February 2009, the Congressional Budget Office was predicting a $2.9 trillion hole in the economy over the next two years; an $800 billion program, partly consisting of tax cuts that would have happened anyway, just wasn’t up to the task of filling that hole.

Critics in the second camp were particularly worried about what would happen this year, since the stimulus would have its maximum effect on growth in late 2009 then gradually fade out. Last year, many of us were already warning that the economy might stall in the second half of 2010.

So what actually happened? The administration’s optimistic forecast was wrong, but which group of pessimists was right

[hometoroost]

How many times in a row can this guy be wrong and still stick to his guns? Everyone is entitled to do something stupid now and again - this guy is abusing the privilege.

[yldstrk]

yeah if I didn’t spend myself out of debt last week at the mall, I think I’ll try again at the car lot this week

[SeekAndFind]

Krugman observes that after the original stimulus:

* Interest rates DID NOT rise as many feared. He argued that the stimulus was too small. Temporary deficits weren’t a problem as long as the economy remained depressed; we were awash in savings with nowhere to go.

* Inflation did not rise as many feared. Key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.

* GDP Growth DID accelerate last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.

IN OTHER WORDS, THE STIMULUS WORKED, BUT IT DID NOT WORK BECAUSE IT WAS NOT APPLIED IN A SUFFICIENT SCALE !!!

ERGO : WE NEED ANOTHER ROUND. A BIGGER ONE AT THAT !!

That’s this Nobel Economics Laureate’s take.

[popdonnelly]

None is so blind as they that will not see. No point in arguing with this guy.

[In God I trust]

This guy is a complete fool. Why don’t they try using the 80% they still have from the last one? Nobody seems to realize that most of the last stim. money hasn’t even been used. IDIOTS!!!!!!!!!!!! God we have a lot of stupid people running around in this country.

[newnhdad]

I smell another Pulitzer and a Nobel for this guy..

[silverleaf]

“.. the Republicans will oppose him regardless — if he came out for motherhood, the G.O.P. would declare motherhood un-American.”

This drivel discredits Krugman as a serious debater and is compeletely unworthy of a Nobel prize winner. Not that the Nobels have any credibility left after the peace prize being bestowed on the Soetero by euroliberal bromantics.

[Question Liberal Authority]

The administration’s optimistic forecast was wrong, but which group of pessimists was right

The ones who said the stimulus would not stimulate the economy, and would add to soaring, unsustainable levels of debt?

[Oceander]

[SeekAndFind]

Read his arguments. He does NOT concede that he is wrong. In fact he insists he was right.

Krugman observes that after the original stimulus:

* Interest rates DID NOT rise as many feared. He argued that the stimulus was too small. Temporary deficits weren’t a problem as long as the economy remained depressed; we were awash in savings with nowhere to go.

* Inflation did not rise as many feared. Key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.

* GDP Growth DID accelerate last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.

IN OTHER WORDS, THE STIMULUS WORKED, BUT IT DID NOT WORK BECAUSE IT WAS NOT APPLIED IN A SUFFICIENT SCALE !!!

ERGO : WE NEED ANOTHER ROUND. A BIGGER ONE AT THAT !!

That’s this Nobel Economics Laureate’s take.

Also, Krugman has lectured that you CANNOT compare a trillion dollar economy to a household budget. That is trying to compare apples with oranges. They are two different things, both in scale and in scope ( not saying I agree with him, just paraphrasing his arguments ).

[silverleaf]

don’t you wonder what’s in Krugman’s personal retirement portfolio?

[Son House]

Is Krugman on the same page as Christina Romer?

Christina Romer: My Plan Failed (Outgoing Obama Economic Adviser Admits Fiscal Stimulus Failed)

http://www.freerepublic.com/focus/f-news/2582151/posts

Christina Romer’s True Confessions

http://www.freerepublic.com/focus/f-news/2582325/posts

Romer: We had no clue … and still don’t (On Economy)

http://www.freerepublic.com/focus/f-news/2582253/posts

[Question Liberal Authority]

if he came out for motherhood, the G.O.P. would declare motherhood un-American.

That's because Obama would write a 2,000 page law filled with Socialist ideology, call it a "Motherhood Bill", pass it in the dead of night before anyone could read it, and then attack anyone who disagrees as being "anti-Motherhood".

[CharlesWayneCT]

It’s a lot easier to write columns if you can misstate the opposition’s position, and lie about what you said before.

[CharlesWayneCT]

I don’t remember worrying about inflation during the 1st stimulus. I remember worrying about deflation because of rising unemployment.

It was the low interest rates that were said to possibly cause inflation if they were kept low too long.

[THX 1138]

Meanwhile, the timing of recent economic growth strongly supports the notion that stimulus does, indeed, boost the economy: growth accelerated last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.

So what's your point, Professor?

Constant stimulus? Stimulus as far as the eye can see?

What a dope...

[3catsanadog]

I don’t know much about inflation, but I do know that just about everything I buy at the grocery store costs more than it did a year ago.

[hometoroost]

I didn't say he thought he was wrong. But he is wrong he just doesnt' know it. No amount of government spending can create sustained economic growth in the same way that reducing tax rates can. Yes the economy crashed after the stimulus and if the stimulus had been larger the crash would have been bigger and the hole to fill that much larger.

And just because inflation isn't back yet doesn't mean it won't be.

[CharlesWayneCT]

I know. He misses the whole point of a stimulus, it’s to “stimulate the economy”, not to “be the economy”.

It’s like saying that you should keep giving someone CPR forever, because you are doing it wrong and every time you stop they are still dead.