Paul Krugman: Stimulus Too Small, Second Package Likely (VIDEO)

Paul Krugman, the professor of economics at Princeton University and a Nobel Prize winner, spoke Tuesday to CNBC, where he discussed his views on the stimulus package.

The $787 billion stimulus is not nearly enough to fill the "well over $2 trillion hole" in the economy, Krugman said. "A fair bit of the bill is not really stimulus," he adding, noting that just about $650 billion would actually spur consumer spending and other types of stimulus.

It is "pretty likely" that the Obama administration will try and pass a second stimulus package in the next few months, Krugman said.

The economy is likely to remain depressed for at least two years, but probably much longer than that, Krugman said.

As for real estate, Krugman said that the housing bubble is still not fully deflated.

"You don't have to fill a flat tire through the hole," Krugman noted. He said home prices would likely drop another 10% to 15% before they bottom out.

As for unemployment, Krugman is predicting it will peak around 9% sometime later this year. There is a chance unemployment could reach the double digits, however, if the crisis continues to spread rapidly across the globe.

WATCH:

Comments

[vedder110]

07:38 PM on 02/18/2009

How utterly predictable.

[URDRWHO]

12:08 PM on 02/18/2009

Paul Krugman,'s work was on trade and the Nobel Prize was for his work on trade. Most of his work stopped in the early 1990's.

I personally do not have much time for economists. They spend a lot of time and energy writing about the common sense world of commerce. But Krugman has left his unbiased hat at home and instead has opted to use economics values as a political purpose.

http://www.forbes.com/2008/10/13/krugman-nobel-economics-oped-cx_pb_1013boettke.html
Unfortunately, and unlike both Friedman and Galbraith, Krugman's work devolved from science to ideology and finally to political partisanship. Friedman and Galbraith had always kept (though from differing perspectives) on the scientific to ideological spectrum, but neither became overtly partisan in their writings. This cannot be said for Krugman and the way he has used his platform as an economist and as a columnist for the New York Times for his Democratic partisanship purposes.

This would be innocent enough if Krugman were just another political pundit, but now the prize has given him an enhanced platform from which to pronounce his partisan positions as if they are grounded in economic science.

[Kingbreaker]

06:59 PM on 02/19/2009

What?

Milton Friedman, the deity of the Chicago School of Robber Baron Finishing?

Hello?

Friedman lost his sanity years before he lost his health.

[Erdgeist]

10:19 AM on 02/18/2009

Prof. Krugman also needs to come out against free-trade. It ain't free -- it is destroying this nation. What is more, we have become a beggar nation.

If free-trade is so beneficial then let's compensate those who have been its victims; who have lost their jobs seeing them go to China or elsewhere. (Keep in mind that Keynesian economics is against free-trade especially when it is unfair, creating a trade deficit, and when a nation is in a recession.)

Keep in mind that Prof. Krugman said in the past:

"While nations generally gain from trade, however, it is quite possible that international trade may hurt particular groups within nations... " (International Economics, seventh edition, 2006).

I hope Prof. Krugman realizes that we have a lot of hurting "particular groups" within our nation who need compensation who didn't benefit from free-trade. Maybe the good professor can tell Congress to use all the benefits from free-trade in the way of cash and trickle the cash down to we the "particular groups".

[URDRWHO]

12:42 PM on 02/18/2009

Most people on this forum could care that Krugman is a free trade advocate and said: "While nations generally gain from trade, however, it is quite possible that international trade may hurt particular groups within nations... " (International Economics, seventh edition, 2006)."

This is a myopic forum that as long as someone purports to support one party, the Dem party, whatever other views supported by a person is OK.

I wonder how, as an economist, Krugman considers bailing out 9 million families with mortgages helps people who purchased a home that was within their income level. Many, many people are having a hard time paying their mortgage and who gets to pick who gets bailed out? Do you think the many, many millions that are not the chosen ones will sit tight; will keep paying their mortgage; keep paying taxes and their taxes are going to help bailout only certain chosen ones. The chosen ones, are they the people that took out mortgages that they never, ever had a chance to re-pay? The people that should not have qualified for a mortgage? Will redlining be used in the bailout? Hm??????????????????

Seventy five $billion to help 9 million families works out to be about $8,300 per family. Ah but when has government been friends of arithmetic .

A big fat Pandora's box has been opened.

[395spoons]

09:42 AM on 02/18/2009

Nobody is talking of repealing the Bush tax cut for the wealthy anymore. How much money would that generate if it was repealed right now?

[URDRWHO]

12:45 PM on 02/18/2009

I've never been in that category to get the wealthy tax cuts. I can't remember so maybe you can tell me. What tax cuts do you make reference to?

[mamacat]

06:09 AM on 02/18/2009

Mr. Krugman's views are like a breath of fresh air. I do not always agree with what he says publicly, but usually I am thankful for his point of view. In an era of trickle down nonsense, and more and larger tax cuts for the wealthy, he preaches sanity. He not only deserved the Nobel prize in economics, he deserves to get it again.

[machivellianX]

03:14 AM on 02/18/2009

We might need to invade Canada soon for their trees if we keep on printing at this rate.

[truthynesslover]

03:32 AM on 02/18/2009

Theyll be building a wall to keep US out!

[mamacat]

06:15 AM on 02/18/2009

Isn't Canada our single largest supplier of imported petroleum? There is probably a plan for invasion in some desk in the Pentagon, waiting to get dusted off.

[themodernleader]

11:25 PM on 02/17/2009

My Thoughtful Critics and Friends: Few academics who have the American Republic as their guide, are given airing in our controlled media. Additionally, our universities, especially our Ivy League institutions are increasingly under the imfluence of an economic ideology that favors the financial institutions over work and productivity.
Rapidly, we are losing our ability to communicate other than one view of economics and losing our competence to discuss our perilous conditions except in relation to bailing our the perpetuators of fraud and swindle.
How we address our economic, financial travails will determing the fate of our Republic. in my estimate.

[ImmanuelGoldstein]

11:12 PM on 02/17/2009

If you really believe it was WW2 that dragged us out of the Depression then this next stim is going to have to be a doozy.
US spending at the height of the war was 38% of GDP! That's over $7 Trillion bucks in today's money.

[Buddy McCue]

10:49 AM on 02/18/2009

Incredible.

[BruceJoffe]

09:53 PM on 02/17/2009

After the Republicans' "winner take all" steamroller politics, power has now swung to the Democrats. President Obama's administration hoped to find a more collaborative way to negotiate governance of our great country. Obama's leadership tried something different: listening respectfully, including Republicans in policy development, and compromising to accommodate Republican concerns.

The final version of the Economic Recovery act has cut proposed spending by over $100 billion over the previous version, just to accommodate Republicans and gain their votes. The act also increased tax cuts for the wealthy in spite of ample experience that this doesn't do much to help the economy. These compromises were made to include Republicans in solving our common problems, yet, only three voted with Democrats to pass the act. Republicans remain obstructionist.

Democrats would be well-advised to use the political power they currently have to fix the massive problems caused by years of Republican hegemony, and not to dilute their cure with Republican snake oil. Collaboration is a two-way street, and Republicans have shown deceit in working toward effective solutions.

In California' legislature, six Republicans are paralyzing the state budget with their stubborn ideology instead of pragmatic governance.

[Heady]

10:18 PM on 02/17/2009

It's really easy to get support back when you can stick it out and go "HAHA GOTCHA. See? We told you it wouldn't work out in the end!"

Oh silly GOP.

[Eyeswideopen1]

10:56 PM on 02/17/2009

They will be saying that within the next 30 days so we will have to listen to that crap for at least 5months before the actual effects start to become measurable.

[Peter007]

10:27 PM on 02/17/2009

The study of economics is the study of the struggle between the haves and the have nots.
The Republicans feel the best way to distribute wealth is for the free market to determine where wealth flows.
The democrats want the government ( the party ) to have the power to decide who gets what wealth and when.
Why should those that are in danger of losing their wealth give in to their looters?. What is their motivation?

[cheforacle]

09:58 AM on 02/18/2009

That's a gross oversimplification of the two parties' positions. Democrats over the last fifty years have also believed in the free market system but with more regulation. The GOP has resisted sensible regulation. Both parties have been AWOL at modifying regulatory structures to fit new realities.

[Buddy McCue]

10:52 AM on 02/18/2009

Republicans don't believe in any free market. That's just the cover story.

They have their interests, just like any other organized political group has. Republicans have been busily changing the rules and re-writing the laws to their own advantage. Why wouldn't they do this?

[jimrs6]

09:40 PM on 02/17/2009

Krugman always has his head cocked over to the left, and he never blinks. Humorless and creepy. Reminds me of Cuckoo's Nest.

[Eyeswideopen1]

10:51 PM on 02/17/2009

By left you mean talking about stuff pragmatically that actually works as opposed to ideologies that don't. Other than that he is an equal opportunity critic. I don't detect any sort of political bias.

The guy won the Nobel Prize in Economics so I am MORE than willing to give him the benefit of the doubt as opposed to the GOP gas bags who just can't get past "we need tax cuts".

[truthynesslover]

03:31 AM on 02/18/2009

He actually has a good sence of humor .its just kinda hard to be funny when youve seen the worst collapse of your countries economy coming for years and no one listened till it was too late.
Krugman;
So, how different is what Wall Street in general did from the Madoff affair? Well, Mr. Madoff allegedly skipped a few steps, simply stealing his clients’ money rather than collecting big fees while exposing investors to risks they didn’t understand. And while Mr. Madoff was apparently a self-conscious fraud, many people on Wall Street believed their own hype. Still, the end result was the same (except for the house arrest): the money managers got rich; the investors saw their money disappear.
See ?thats funny, and his students say hes hilarious in class.

[Dave27]

09:32 PM on 02/17/2009

A $2 Trillion dollar drop in the economy just can't be fixed by $800 Billion. Try some math, Pugs.

[Eyeswideopen1]

10:53 PM on 02/17/2009

Problem is more money is an impossible sell to the GOP gas bags right now without them flailing their arms around on Fox Noise feining theatrical outrage.

There will have to be a bunch more money for Tarp III so that will have to be another epic battle.

[Myshkin57]

11:53 PM on 02/17/2009

It certainly can't with the way the stimulus got structured to appease the GOP.

Stimulus like infrastructure, direct payments to those in the lower income brackets, and extended unemployment insurance stimulate the economy to the tune of over $1.50 for every dollar spent.

Tax cuts are just above break-even as far as stimulus goes. So, a $2 trillion dollar hole could be filled by about $1.2 trillion of the right kind of stimulus. With the silly concessions to the GOP, it'll take probably a bit more than $1.6 trillion.

So, the GOP cost the country an extra $400 billion and if they had had their way, they would have cost us the whole $2 trillion. (I'm working off of estimates from Moody's Economics as to how stimulative different expenditure are to the economy.)

[themodernleader]

08:39 PM on 02/17/2009

JustmeinAZ. The modern economist from academia reflects the knowledge from declining institutions of higher education. There are at least three reasons for the failed knowledge that most of them proclaim as truth. First, members of higher education are not held accountable. Therefore, once attaining tenure, most of them do their own thing which is almost always for there own self interest serving the financial and political needs of special interest groups.
Second. the knowledge of modern universities is so bi-furcated and specialized that only a handful of scholars possess a grasp of the totality of variables impacting economic management and behavior. Further, economic studies originate from funding by special interest groups to prove the righteousness of their own selfish agendas. Studies that benefit the national and common interests of our citizens are commonly tainted by covert bias. Independent thought and intellectual research to benefit the mission of our democracy are virtually non-existent.
Therefore, taking the recommendations of contemporary college professors in America without studying their past associations, interests and aspirations is not a prudent intellectual process in solving the crisis in American economic, financial policy making.

[pjburke]

08:49 PM on 02/17/2009

thanks, gas station jockey.... I'll take all that under advisement.

dimwitt pyook on a plate, fer krissakes

[MaximMaximus]

09:00 PM on 02/17/2009

How do you say so much without touching the truth while sounding as if you are? You surely are skilled. Now go to your corner, and wait for a clue.

[leftLibertarian]

08:30 PM on 02/17/2009

Rest the economy to 0. By that I mean erase all debts with banks that accepted bail out money. Next, give every one a choice of a car from GM, Ford or Chrysler. If they don't want one give them a $10,000.00 debit card to spend or save as they please.

[jeremyemilio]

11:02 PM on 02/17/2009

That Is what their doing... it's also known as hyperinflation.

[Badfickle]

09:25 AM on 02/18/2009

We are in more danger of deflation at the moment.

[DontJustFollow]

08:08 PM on 02/17/2009

when is this bag of hot air going to finish his 15 miinutes?

when is he going to tell us how we are going to pay the trillions back?

The genius Greenspan had a theory too - that one didn't work out so well did it?

[pjburke]

08:45 PM on 02/17/2009

Once you have earned your PhD in economics... earned a tenured faculty position at one of the leading universities in the nation... established such a degree of preeminent credibility -- worldwide -- in the field of economics and economic theory that you are awared the Nobel Prize in economics, then you MIGHT be excused for such an obnoxiously rude epithet as "bag of hot air" with regard to this man.

Since you have not done any single one of these things, you have no excuse. So stick a gymsock into that gaping, obnoxious blowhole and take a seat while the adult patriots fix what your crowd of trait.ors, luna.tics and thiev.es phhukked up. Again.

[MaximMaximus]

09:02 PM on 02/17/2009

While one doesn't need a PhD, and academic title not a Noble Prize to criticize a Nobel Laureate's opinions, I agree with you that the person who is doing the criticizing needs to have good credentials and credibility. And his counterpoint needs to be well substantiated.

[Dave27]

09:30 PM on 02/17/2009

Words and thoughts don't come easy, do they. That's OK, rest and try again later.

[funkalicious]

07:36 PM on 02/17/2009

Spending nearly one million dollars to create one forty thousand dollar a year job that is only sustainable for two years~ is not enough ? We should spend more? Paulie has an over active imagination and an over inflated ego. What is his true worth to society. How is this idea ever going to work Krugman?

How much is enough? Tooooooooooooo much ~is never enough with this guy.

[pjburke]

08:51 PM on 02/17/2009

I have great NEWS for you!

There are these things out there -- not new, but new to you -- called FACTS.

Go familiarize yourself with some.

[Heady]

10:16 PM on 02/17/2009

Take Econ 101. It's amazing.