Krugman: Obama's Stimulus Doesn't Go Far Enough

Paul Krugman has already criticized President-elect Barack Obama for appearing to rely too much on tax cuts in his economic plan. Now he's adding a more general concern that the plan doesn't go far enough to fill the 'output gap' between what the economy can produce and what it can sell. While praising Obama's strong words in his speech Thursday, Krugman writes that "Mr. Obama's prescription doesn't live up to his diagnosis."

The economic plan he's offering isn't as strong as his language about the economic threat. In fact, it falls well short of what's needed.

...

[O]nly 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."

Whatever the explanation, the Obama plan just doesn't look adequate to the economy's need. To be sure, a third of a loaf is better than none. But right now we seem to be facing two major economic gaps: the gap between the economy's potential and its likely performance, and the gap between Mr. Obama's stern economic rhetoric and his somewhat disappointing economic plan.

Top Democrats in Congress have aired similar concerns -- in particular questioning whether tax cuts will have much of an effect on the economy.

Comments

[rejoiceinit]

Just saw the Obama presser...WOW. Obama to Congress and critics(like Krugman)--PUT UP OR SHUT UP! Stop sitting on the sidelines and complaining Krugman, get in the game!

[vjoseph]

That was really great. I am glad he said that

[bosshogg]

That was impressive... So what will Paul write tomorrow

[nomobull]

good about time

[TheInsomniac]

I agree that tax breaks do not help the economy. However, the biggest issue with our economy is that people are afraid to spend money. While this is good for those individuals who are finally creating savings, paying off debt, and thinking of their long-term well-being, it is a bad thing for the economy as a whole.

A large proportion of our population describe themselves as fiscally conservative. They have subscribed to the frequently discredited beliefs of the right wing, buying into the Alzheimer's-addled ramblings of Ronny Reagan. If promising a huge tax cut is able to cement this large portion of the population into believing that help is on the way, it will go far toward righting the ship. The frequent negative detracting of Krugman et al. unfortunately misses the bigger picture of the social component of our nation's economic problems. It's not that they don't understand what I have described, it's that they do not have the political wherewithal to see it in the way that Obama is able.

[vjoseph]

Well Paul, Obama gave you a challenge to come up with ideas and to go to him. I wonder if you are going to continue to whine or do what he says

[Camel54]

Krugman did go to Obama with his solution to this problem. That's why he's disappointed, Obama is not taking Krugman's advice. It appears instead that Obama is trying to appease Republicans rather than do what's needed. Of course, the argument is that if he had done what Krugman suggested, the Republicans would likely make sure it did not pass. So there's the trade-off...try what's right and have it fail or do a partial fix and have it enacted.

It's just another sign of our ineffective, spineless government that always waters down, pares down and reduces legislation to make it as palatable as it is useless.

[THE JEDI 69]

If Krugman is so smart..why didn't he see this mess coming..and more importantly..tell all those people how to get thier fiddy billion back form Madoff...or shat the **** up

[jazzman]

He did. Where were you for the last 2 to 3 years?

[Independent voter]

Here's some news that you might be able to use:

1) Obama does not walk on water, he is not the second coming, he makes mistakes.
2) Krugman is a sharp guy who just won the Nobel prize in economics
3) Krugman did see the mess coming. Read 'The Great Unravelling'
4) Obama has said that he is willing to listen to Krugman

Too much Kool-aid apparently rots the brain.

[authoritarianbootlicker]

It's Flavor Aid dude! Also, if you have a better idea for the economy please post it as well.

[okmichael]

People, Obama has a strategy here and it's being lost on people. When asked a week or so ago how bit a package he would propose, he answered by saying that all economists across the spectrum agree we need a package and the spectrum runs from a low of 700B to a high of 1.2B. He said he was going to "start" (important word) at the "low end" of this and then let the process unfold. He fully understands that it's a "process" ... ...He knows it will "grow" once he puts it out there as the Congress does its part. If he started at $1.2B and it grew from there -- what kind of a mess would we have then? The point is ... there is a very canny method to the way Obama is going about this. Stay tuned.

[PATina]

I'd agree w/ you except he (President Obama) said he wouldn't accept any pork in this bill. How then will it "grow" in Congress???

[vjoseph]

With good ideas. Did you listen to the press conference today?

[houstonobserver]

What I see in all this is the consistent way in which Obama practices "inclusiveness". Throw out a plan - not 100% perfect - but let everyone have a say, and then, at the end of the process, he will weigh the +/- and make a decision.

I believe he is listening to Krugman, (and others) and he is quietly refining his strategy. Remember, he did say that he doesn't listen to the good things people are saying, but rather, the criticisms.

http://www.msnbc.msn.com/id/28546772/page/6/

Don't forget that Obama is a poker player. He will show his hand in due course, and right now, he must reign in any sensitive remarks till the 20th. For the people that think that he plays with an ace up his sleeve, don't. I believe he is just very good at the game.

[NWBrunette]

Amazing that you think you know so much about Obama's personality and the way his mind works. What, are you best buds? Or more likely, its just more Obama worship - that everything he does or says is just perfect regardless of any evidence to the contrary.

[vjoseph]

YAWN. If you had listen to the press conference instead of putting your fingers in your nose, you would understand what the OP was saying. I don't expect much from you, but you could at least make an effort

[RedneckDem]

How about a tax cut for business' operating 100% in the USA and the repeal of all tax breaks for offshoring jobs. Sounds like a good trade-off and sets the scene for a natural progession of companies back to our shores (where the product was conceived originally).

How about a stimulus plan for Mexico so many of the illegals go home, because no matter how much empathy you have for illegals and the why's, how's and who's to blame for how they got here, they contribute somewhat to our stagnant wages.

This past Christmas was a disgrace. No matter how much I looked I could not find American made anything!!! If anyone can give a good reason as to why this is good, aside from the typical cheaper stuff drivel, let me know...

[junebuginFL]

Well, I just dont see how America can compete with people working for pennies a week. We cant compete with that, we need to change our strategy. Businesses will go where cost of business is cheapest to be as competitive as possible.

[Osmona]

You're ABSOLUTELY right!!! What I clothing I did find that was made in the USA, it was too expensive to buy. I would like to see an end to that madness.

[OBXartist]

Tax cuts much, much earlier in the process might have done some good and encouraged spending and growth. But now, after so many months of downturn (the economy tanked two years ago where I live) most of the individuals and businesses that receive a tax break will use it merely to help pay off outstanding bills and reduce whatever other debts they can. Certainly, I welcome the tax break from a personal standpoint. But, I don't think it's going to have the intended effect of energizing the economy. Most of us would need several times the amount of tax relief we're expected to receive before we felt free to spend again.

[junebuginFL]

In april may of 08 we got a stim check of $600/$1200, you're right it didnt change a thing, it got worse, most probably sat on it. I dont think it will change much either. With all those who rent out there, I would start looking to buy a home. I pay $100 more than what I paid in rent for a place 2x the size and I am paying myself to live there, not someone else. We just moved in a month ago and best decision/time to buy. Start looking, rates are lower than back in 2002/2003.

Housing needs to pick up before the economy has any chance of starting to recover.

[PATina]

I agree that the plan isn't bold enough. While some of the comments I've read here suggests that the bill will go up in Congress.. I have my doubts about that especially since President O has said he won't accept any pork in the bill. I guess many of you don't believe him. And from what I got from his interview w/ John Harwood is that he started w/ the low end price in order to get it through Congress (figuring it's more likely to be approved).

[LiberTLover]

And exactly where can we read "The Krugman Plan Guaranteed To Fix The Economy in 90 Days"?

[omo]

Every day for a while now I have been reading about how "Krugman disagrees with Obama about
x, y or z" or "Krugman disagrees with Obama over appointment a, b or c." The articles have been consistently negative in tone and have not offered constructive alternatives which are well thought out. I am not even going to bother reading this article, it may be important and Krugman may be right but he has lost me as a reader. If he wants to actually have authentic input into this administration he needs to learn what to focus on and what to leave alone. This incessant micromanaging from the security of a newspaper column is just not doing it for me.

[Binx101]

It's been my observation that if one read's the articles by Krugman it becomes very evident that there is little connection between the head-line here and Krugman's words in the NYT.

In fact, its astounding. This is becoming a sensational headline factory - primarily - and it is very disappointing.

A great number of the headlines here are misleading and apparently deliberately misleading.

Krugman's underlying article was a question with some observations - nothing like it is being presented here. Read the article.

Binx101
The Almost Daily Binx
http://binx101.wordpress.com

[hortonhearsawho2]

probably works on it nightly and even discussing it with the servants...

[robXdion]

Krugman doesn't know how he wants to criticize Obama. One day Obama isn't doing enough and the next day he's doing too much. He just wants to stay in the news because it strokes his ego. People need to stop feeding his childish compunction to get attention by saying anything contrary to what Obama is doing.

[junebuginFL]

Well he does write for the New York Times, no? Of course he will get attention. He has also been supportive of him, nothing wrong with shining some light, although spending more money does not sit well with me, so for the most part I disagree with throwing more in tax cuts at the problem(which is what Krugman is saying, but just investing in roads and bridges I dont think will cut it). I think we did dodge some serious bullets with saving all those banks, the outlook for 2009 would look worse had nothing been done.

I think they should take that money and invest in making our own energy all means of energy production, that will create new technology and good paying jobs. Tax cuts to all just put a small band aid on an open wound and prolong the inevitable tougher times. We need to invest in our future and energy independence I think that could start a second industrial revolution.

[McChimp]

Seems like Obama is taking heat from his own party: "snubbing" Dean, inviting Warren, and now his stimulus package, where were these complaints during the Bush administration?

It's upsetting me and disappointing that Obama's harshest critics are not the Republicans, heck even Mitch and Boehner want to work with him. It's Obama's OWN party and his own supporters giving him the most cr@p because "he's appeasing the right and not far left enough." Obama didn't run to be President of the far left or far right, he ran to be President of the UNITED STATES OF AMERICA.

Krugman and the rest of the far left Democrats complaining need to sit down, shut up, let Obama take that oath of office and let him do things his way, this premature whining is getting out of control and is unnecessary since Obama is inheriting two wars, a failed economy, and a crisis in the Middle East. What Obama needs right now is NOT criticism, but SUPPORT. Some of you need to chill the F#CK out.

[junebuginFL]

Amen, I am shocked there is more criticism from his own party than non supporters.

[Fromageball]

I agree, we don't know how Obama's plans will turn out and he isn't even in office right now...unless you've got a plan to counter Obama's...then shut up until you have one.

[PATina]

There were plenty of complaints during the Bush admin. I'm sorry but it's not about if it's "left or right"... it's about what will work. We know from last year that giving people a couple of hundred of dollars isn't going to really stimulate the economy. We know from "trickle down" that giving businesses tax cuts don't necessarily translate into new jobs or expanded businesses. Your opinion that people who see him making the same mistakes and should just be quiet is irresponsible. Yes... I believe we need a stimulus package... but I think he's not doing enough to actually stimulate the economy. I also think that if this doesn't work... he's not going to get a second chance (and possibly not a second term). I would much rather people say something now... than in four years complain that he didn't get re-elected.

[McChimp]

Yes there were complaints, but the Dems rolled over backwards for Bush.

Now that Obama is about to take office, these same Dems are opposing Obama and his plan to HELP the economy.

Unless any of these Dems has a better plan than Obama's, they need to shut up and do their best to pass the plan. These same Dems complained about not having enough of a majority, now that they are one seat away from preventing a filibuster, they go against the President representing their own party in the WH, talk about shooting themselves in the foot.

[Liberalforsure]

Let's keep those trickle down economics that worked so well for us these last eight years...and let's continue to not give the middle class any breaks...

[junebuginFL]

Well I would consider myself middle class, and $1000 bucks will help, but $10,000 I could shop a lot more if those retailers need some stimulation!

[DandaPanda]

Krugmnan is the bloated ecconomist.

[Space Walker]

Krugman has become a bit annoying with his opinions, but i must agree with him and the many other economists; this stimulus bill is simply dressed up with a bow tie, rather than a jeans and t-shirt like all the others, it will do squat to help our ailing economy and the millions of our citizens that are being submerged by debt and everyday bills, including the sky rocketing price of food. You guys wanted change, you got it, in a pathetic taxcut and useless pandering. I am beginning to see clearer that Obama is bought and paid for; of course his plan doesn't go far enough, he's just lip servicing you guys. I can't help but to think of a conspiracy theory i read of these guys wanting the U.S. to fall flat and bankrupt to usher in a new monetary system and the alleged "NWO" , Obama seems to be following lock step with the elite and what these conspiracy theorists have predicted, even before the man was elected president. Some things will make you say, hmmm...

[junebuginFL]

Uh oh, this will draw fire. May God help us all.

[LiberTLover]

What an appropriate name, but I think the chin strap on that cute little tin foil hat is way too tight.

[Space Walker]

And your name is pretty much an oxymoron; anyone that loves their country, along with the right of liberty can see that this country is in peril economically. Once such a thing occurs, you become a slave to the ones you owe the debt to, and guess who pays for that debt, the little people like you. As for me, the Bush tax cuts help me a lot, it saved my family tons of cash, however, it was at the expense of people like you and the many others that are trying to make ends meet. As the economy dwindles and food prices continue to soar, we will see how much liberty you will love, because it's a stated fact my friend, the worse is yet to come. Anyway the cake is sliced, i am fine, However, the millions of Americans that are not in such a position will not be, and this stimulus plan will do nothing to relieve them from the tsunami that will be heading their way. So, next time, before you spout off at the mouth, at least contribute something to this topic, rather than a neanderthal response.

[PATina]

I consider myself a 'conspiracy theorist'... but I disagree w/ your assessment. I really believe his plan doesn't go far enough because he's "bargaining" w/ himself. Typically in negotiations... you start at one extreme... the person you are negotiating w/ starts at the other extreme... and you work until you reach a "happy medium". It seems as if Obama decides on the "happy medium" in hopes not to offend people. I think he means well... but meaning well won't necessarily get the job done.