Paul Krugman, winner of the Nobel Prize in economics, provided some interesting insights in the New York Times this week on the 2008 economic stimulus, including why it has not worked as hoped, and suggests ways to appropriately stimulate the economy in coming months. A few of the more salient points from Krugman include:"The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round."
Krugman argues that the 2008 stimulus was too cautious, too minimalist and that a bolder, more profound stimulus would have better served the American people and the U.S. economy. He argues that a new round of stimulus is necessary and sound economic policy, but a second round of stimulus must be much bolder than the first.
Responding to critics of the 2008 stimulus as too much and those politicians suddenly concerned with Washington spending (where were they when tax cuts and defense spending drove the deficit into record territory?), Krugman rejoinders:
"And if, as expected, the G.O.P. wins big in November, this will be widely regarded as a vindication of the anti-stimulus position. Mr. Obama, we’ll be told, moved too far to the left, and his Keynesian economic doctrine was proved wrong.
But politics determines who has the power, not who has the truth. The economic theory behind the Obama stimulus has passed the test of recent events with flying colors; unfortunately, Mr. Obama, for whatever reason — yes, I’m aware that there were political constraints — initially offered a plan that was much too cautious given the scale of the economy’s problems."
Krugman urges President Obama to go bold next week and in coming months, in connection with stimulating the economy. Krugman's N.Y. Times Op-Ed can be accessed here.
My brother had an old saying when we were growing up which I am sure everybody has heard of in some fashion or form: “scared money don’t make money.” On that note, I have to agree with Krugman and urge Obama to be bolder. The administration prior to the Obama administration was daring with its spending as well, but as the saying goes—it is not what you spend but what you spend it on. It is too soon to calculate the full effects of Obama’s economic policies, thus the majority of the displeasure with his policies is premature and misguided. For those that do not take the time out to try and fully grasp the situation and instead prefer to absorb the Medias misinformation, I ask you, where were the media critics all those years when we were being driven into this economic downturn?
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