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Saturday, February 07, 2009

What the Centrists have Wrought

From Paul Krugman (via The New York Times):

"I’m still working on the numbers, but I’ve gotten a fair number of requests for comment on the Senate version of the stimulus.

The short answer: to appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller, and even more focused on tax cuts.

According to the CBO’s estimates, we’re facing an output shortfall of almost 14% of GDP over the next two years, or around $2 trillion. Others, such as Goldman Sachs, are even more pessimistic. So the original $800 billion plan was too small, especially because a substantial share consisted of tax cuts that probably would have added little to demand. The plan should have been at least 50% larger.

Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.

My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years.

The real question now is whether Obama will be able to come back for more once it’s clear that the plan is way inadequate. My guess is no. This is really, really bad."

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Blogger Stan Matuska said...

The whole economy things just stinks anyway.

We *should* have seen this coming and prevented it a year or two ago, but who knew? The government should have.

So, since our government didn't see it coming to prevent the eceonomic downward spiral, how can we trust them to know how to fix it and how much it will cost to fix and where and how to fix it???

Too bad we have so many illegals doing all those jobs that nobody wants!

In some ways I think the market can correct itself over a period of years, but not totally.

I think the government bailouts are stepping way over the line. Now we and our government are part owners of banks, auto makers etc., and now have to monitor their salaries etc. Who's going to do that anyway? Is that governments role?

Just venting. I think it stinks that this wasn't addressed during the Bush years.

title="comment permalink">February 08, 2009 11:10 AM  
Blogger Tim Zank said...

Unfortunately, Krugman is a voo-doo economist with his end game being socialism. He fully believes if we simply have the government basically hire everyone they will all be employed. That's true, if you let Uncle Sam just buy a stake in everything (mfg,banking,health cre,energy,etc), they can hire everyone in the country.

That's a wonderful idea as long as the Fed keeps printing money. Of course that's problematic too, because the more you print, the less it's worth.

Krugman doesn't have the economic interests of this country in his sights, he has the social re-engineering interests in his sights, and that ought to make even you left wingers nervous.

John, do you really want everyone to work for the government?

title="comment permalink">February 08, 2009 6:28 PM  

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