The Obama Gap by Paul Krugman

[dtotire]

The Obama Gap


By PAUL KRUGMAN
Published: January 8, 2009

“I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years.”



Paul Krugman

So declared President-elect Barack Obama on Thursday, explaining why the nation needs an extremely aggressive government response to the economic downturn. He’s right. This is the most dangerous economic crisis since the Great Depression, and it could all too easily turn into a prolonged slump.

But 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.

Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it’s able to sell.

And the Obama plan is nowhere near big enough to fill this “output gap.”

Earlier this week, the Congressional Budget Office came out with its latest analysis of the budget and economic outlook. The budget office says that in the absence of a stimulus plan, the unemployment rate would rise above 9 percent by early 2010, and stay high for years to come.

more:

http://www.nytimes.com/2009/01/09/opinion/09krugman.html?_r=1&ref=opinion

[xchrom]

1. recommend

[depakid]

2. "Or is the plan being limited by political caution? "

It's being limited by Obama's and his team's incessant desire to pander to Republicans- and enable their policies (even though they're the reason we're all in this mess in the first place).

[stahbrett]

3. Obama hinted strongly the reason the initial amount is on the low end

He knows that Congress is going to want to add to whatever amount he starts with.

By the time the final bill is ready to be signed, it will be much larger.

(I got this from a recent Obama TV interview - unfortunately I don't remember who interviewed him, or on what channel.)

[blue97keet]

4. No mention of the trade deficit (gap) at all?