Krugman, O'Neil Make Dire Economic Predictions

As the Big Three automakers told Congress that they need a bailout to prevent calamitous economic consequences, former Treasury Secretary Paul O'Neill and economist Paul Krugman are both saying it may not make much difference.

In an interview with the Pittsburgh Post-Gazette, O'Neill said:

If the United States doesn't get its finances in order, the coming years will make the current recession "look like a child's birthday party," said former Treasury secretary and Alcoa chairman Paul O'Neill.

"We're headed for the wall at lightning speed. And every day that we don't deal with that set of problems is another day closer to absolutely vaporizing our economy," he said.

"Not to overstate the problem."

Krugman, on his blog, wrote:

1. The economy is falling fast. We'll see what tomorrow's employment report says, but we could well be losing jobs at a rate of 450,000 or 500,000 a month.

2. Infrastructure spending will take time to get going -- a new Goldman Sachs report suggests that projects that are "shovel-ready" are probably only a few tens of billions worth, and that a larger effort would take much of a year to get going. Meanwhile, it's very questionable how much effect tax rebates will have on consumer demand. So it may be hard for stimulus to get much traction until late 2009 -- and that's even if Congress goes along, which may be a problem given all the bad analysis and disinformation out there.

So here's what I'm wondering: will it, in fact, even be possible to pull the economy out of its nosedive before unemployment goes into double digits? I'm starting to wonder.