Let's count out loud:
- 0% interest rates
- TARP and related guarantees
- AIG stealth counterparty bailout (more than 50% went straight to bonuses)
- Trillions in Fed quantitative easing
- Bush #1 -- Tax Rebate
- Obama #1 -- $787 Billion
- Cash For Clunkers -- Tiny in size, huge in stupidity
- Homebuyer's Tax Credit #1
- Homebuyer's Tax Credit #2
- Obama Stimulus #2 -- ?????
So, that's 10 counting Obama #2, and I've probably forgotten a few. The problem thus far has been the attention paid to banks and the lack of focus on infrastructure -- the one thing that needs upgraded everywhere -- and future needs -- a nationwide network of electric car charging stations for example, as Sweden and Israel are building. We seem intent on perfecting the approach of spending a few trillion without actually creating a single thing of value. No new schools, bridges, airports, or industries. Yes, industries. With $100 billion, you can spur the creation of entirely new industries and give a huge advantage to first-mover U.S. companies.
Krugman wants more and he doesn't care about form:
The thing to do, I guess, is to keep making the case for doing more; in particular, we can hope that centrist Democrats will finally realize that timid economic policies are hurting their own electoral prospects. But it’s an uphill fight.
Who’s to blame? The buck stops with the president. But did his economic advisers make it clear to him that the proposed stimulus was way short of what the math suggested we needed, even given what was known in January? Or was Mr. Obama really led to believe that his stimulus proposal was as bold as he claimed it was?
I don’t know. But I’ve got a sick feeling about the whole situation.
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Me too, Paul. Me too.
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Krugman's not done making his case:
The good news from the new GDP report is that the fiscal stimulus seems to be working just about the way a sensible Keynesian approach says it should. The bad news from the new GDP report is that the fiscal stimulus seems to be working just about the way a sensible Keynesian approach says it should.
OK, now for the bad news. What we’d really like to see isn’t just successful job creation; we’d like to see “pump-priming” or “jump-starting” — that is, we’d like to see stimulus jolting the economy into self-sustaining growth. It’s important to understand that this isn’t required to make stimulus worthwhile — it’s neither a prediction of the standard models nor a part of the basic welfare argument for stimulus. But it would be nice if it happened.
And more to the point, if there isn’t a whole lotta jump-starting going on, the original judgment I and others reached — that the stimulus is way too small — stands.
The basic economic logic says that the stimulus should aim to close the output gap. And it’s obviously not remotely large enough to be doing that right now. Nor will it come close in the future.
Still, we’ve gotten the big boost, and it’s clearly far short of what we really need.
And yes, we can afford more.
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As long as we're at $12 trillion, we might as well go for $15 trillion. Why even stop there?
Keynesian clowning aside, the problem as we've written many times is political. Politicians can't handle truth or recessions, so your children suffer. The corporate and state solution should involve cutting back, regrouping, paring un-needed expenses and preparing for healthy future growth not based on insanely cheap and easy credit. Our corporations have perfected it; our governments (local, state, federal) -- not so much.
What we get from Washington instead are endless attempts to re-blow an unsustainable, unrealistic, debt-laced, bubble economy. It popped and there's a big freaking hole in the side. It will not re-inflate. Look at Japan and stop. Just stop. Force banks to deal with the crap assets. Do not ignore the problem or we'll be talking about stimulus #30 in 2017, still wondering why the economy is sputtering, and debating which leg of the WWW economic curve might be right around the corner.
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