Krugman: "Stimulating Thoughts" (Caution: Contains Gloom)

[Kurt_and_Hunter]

Shorter Krugman: The stimulus has worked insofar as it has done exactly what we knew it would do. And the pugs are fools and liars for saying anything different. On the other hand, the stimulus did exactly what we knew it would do: not nearly enough. And funds so far unused from the stimulus package will not change the situation much in 2010.

Krugman has changed his tone on one thing here. He used to deride the "jumpstart" model, or at least the phrase, but now appears to be favoring it. (One of my biggest differences with Krugman during the stimulus debate was his relative dismissal of the jump-start concept, so nyah, nyah, nyah. We needed a front-loaded demand-side money bomb, not spread-out economic pain management.)

This is only an excerpt, in keeping with DU rules. Best to read the whole thing.

Stimulating thoughts, 3rd quarter edition

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... ...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. Here’s a useful table from EPI on the stimulus so far:



The key point from this table is that while most of the stimulus has yet to be spent, the rate of spending as a percentage of GDP is already fairly high (take that, Richard Posner), close to the maximum it will reach over the whole course of the plan. That means that we’ve already seen much if not most of the impact of the stimulus on growth.

http://krugman.blogs.nytimes.com/2009/10/30/stimulating-thoughts-3rd-quarter-edition/

[xchrom]

1. we're in a sad state of affairs. nt

[NJmaverick]

2. "Krugman has changed his tune on one thing here"

He keeps changing his tune and while trying to hide that he has been wrong more than he has been right.

[mkultra]

3. "the rate of spending as a percentage of GDP is already fairly high "

He notes while also saying that most of it is yet to be spent. Another analyst might point out that this high rate of spending will be sustained as the money gets spent over several months. While GDP has a slow effect on jobs, sustained positive growth post recession has a strong impact on jobs. He is right sometimes and wrong on other times.

The thing about economists is that at times, they can profit by acting like TV preachers. If you preach doom and gloom long enough, eventually you will be right and make your name. No one really remembers the misses.

[Kurt_and_Hunter]

4. How cute. A visit from the unrecc fairy. Clap harder to save Tinkerbell!

[NJmaverick]

5. It couldn't possible be that the opinion posted is a poor one

:eyes: