Reply #23: Such a gloomy prediction [View All]

[ProSense]

From the OP:

For the economy is still in deep trouble and needs much more government help. Unemployment is in double-digits; we desperately need more government spending on job creation. Banks are still weak, and credit is still tight; we desperately need more government aid to the financial sector. But try to talk to an ordinary voter about this, and the response you’re likely to get is: “No way. All they’ll do is hand out more money to Wall Street.”

So here’s the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust.

It will be good when everyone stops conflating TARP and stimulus, even in writing. Krugman's doomsday scenario, much like the one he made in March, is based on the notion that TARP effects will preclude more stimulus. He's basically saying that we need more stimulus, but it might not happen.

Given that all the TARP funds haven't been spent. In fact, there are people probably still criticizing Obama for saying he would consider using the funds for a) small business lending or b) deficit reduction.

Second, all the stimulus money hasn't been handed out, a lot of it has been allocated, but not all of it has been distributed.

Not sure what advocating more stimulus has to do with whether or not TARP worked. Is the argument that the TARP funds should have gone to the stimulus? These are two separate issues, and both are important to economic recovery. They're interrelated because bank lending will also stimulate the economy, but the stimulus as passed and now proposed, has nothing to do with TARP.