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

[rnorthro14]

Tax cuts to business should be offered as incentives not just outright. Give businesses tax breaks when they keep people employed and hire on new employees.

I have been out of work since Sept. living in the Boulder/Denver area. I am a highly skilled employee with a good track record but can't get a bite for even an interview.­... I have no incentive to spend and stimulate the economy until I am employed. Keeping people employed and creating jobs will best stimulate the economy.

[montecarlo408]

Krugman, you've been all over Obama's jock about everything. Stuff you know about, stuff you know nothing about. Did he do something to you?

[harriscrl3]

They expect perfection from him and several different people have several different ideas of what they consider to be perfection. Can we grade the plan and say well I'd give it a B+ but here is what I would like to see. Everyone is criticizing something he does and the criticisms are not uniformed so what do they expect. The guy is not superman and I wish they would stop acting like he is.

Carol

[wayoutleft]

i guess a nobel prize doesn't impress everybody. there's still "stuff you know nothing about". of course, some of the "stuff you knew something about" a year ago is what was going to happen to the economy. obama didn't know that. maybe he should listen.

[harriscrl3]

I'm a statistician and I will say this. when you take several different polls you are going to have some polls that underestimate and some polls that overestimate. Paul Krugman is an noble prize wining economist but he is 1 Economist. Obama is NOT listening to 1 Economist he is listening to several so you have some that think he didnt go far enough and some that think he went too far and what you do is find the middle and I suspect that is what Obama did. So while Krugman has the right to say it doesnt go far enough I think it should it be kept in mind that he is only one eoncomist and they are others who say the opposite. I think some of us need to get over ourselves frankly.

Carol