The Obama Gap (Krugman, January 2009 )

[Kurt_and_Hunter]

...Even the C.B.O. says, however, that “economic output over the next two years will average 6.8 percent below its potential.” This translates into $2.1 trillion of lost production. “Our economy could fall $1 trillion short of its full capacity,” declared Mr. Obama on Thursday. Well, he was actually understating things. To close a gap of more than $2 trillion — possibly a lot more, if the budget office projections turn out to be too optimistic — Mr. Obama offers a $775 billion plan. And that’s not enough.

Now, fiscal stimulus can sometimes have a “multiplier” effect: In addition to the direct effects of, say, investment in infrastructure on demand, there can be a further indirect effect as higher incomes lead to higher consumer spending. Standard estimates suggest that a dollar of public spending raises G.D.P. by around $1.50.

But only about 60 percent of the Obama plan consists of public spending. The rest consists of tax cuts — and many economists are skeptical about how much these tax cuts, especially the tax breaks for business, will actually do to boost spending. (A number of Senate Democrats apparently share these doubts.) Howard Gleckman of the nonpartisan Tax Policy Center summed it up in the title of a recent blog posting: “lots of buck, not much bang.”

The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job....

http://www.nytimes.com/2009/01/09/opinion/09krugman.html

[Oregone]

1. Oh! Now you tell us Krugman!

More Monday Morning Quarterbacking. How were we to know?!?

:rofl:

[OHdem10]

4. To be fair Krugman wrote and appeared on TV telling us it was

too small or not enough at the time Obama proposed it.

[ProSense]

2. Hey,

check out the full debate.

[Oregone]

3. So do you agree that more Keynesian stimulus is needed?

[Winterblues]

8. It certainly could not hurt.

eliminate the tax breaks for business' that have been showing substantial net profits and increase spending for infrastructure projects. Invest in green technology by having the PO replace all their vehicles with electric ones. at least the ones that never travel more than thirty miles a day and park at the PO at night. How much gasoline expense would be saved if ten million vehicles suddenly stopped buying gas? The savings would more than pay for the initial purchase price in less than a decade. If the government were to place an order for thousands of new trucks, the price of those trucks would plummet. Right now the people that make those trucks are paying for parts in groups of ten or so. If they were to start buying those parts (like wiring harnesses, guages, batteries, etc.) by the thousands their prices would be reduced by as much as fifty percent. Government spending could be a huge factor in america's recovery if it were done right and not just for war stuff.

[Oregone]

9. Now thats a real answer

Ive asked this specific poster that question 5 times now, without an answer.

Why won't they take a stand on their own? Strange

Thanks for your time on that! I agree.

[Oregone]

7. Why is it so tough to get you to state your opinion on the necessity of further stimulus?

[Leopolds Ghost]

5. Tax breaks for business, meanwhile self-employed will have to report all purchases to the IRS.

And mass transit slashed and in the gutter.

[Skink]

6. we are unlikely to see anymore stimulus spending from this congress.