We Need More Government Stimulus, Says Krugman. Does Congress Have the Courage?

I am a student of Paul Krugman. I believe his The Conscience of a Liberal

should be required reading in every high school and college in the United States. In my humble opinion.

We need the New Deal back, and we need it bad.

President Obama realizes that we are living in a sound-bite world, and Congress does not have the courage to do what needs to be done.

Or they might not get re-elected.

But Congress needs to step up.

Krugman, courtesy the New York Times:

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

And the really bad news is that “centrists” in Congress aren’t able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation.

About that good news: not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

The stimulus didn’t completely eliminate these effects, but it was enough to break the vicious circle of economic decline. Aid to the unemployed and help for state and local governments were probably the most important factors. If you want to see the recovery act in action, visit a classroom: your local school probably would have had to fire a lot of teachers if the stimulus hadn’t been enacted.

And the free fall has ended. Last week’s G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent. As Mark Zandi of Moody’s Economy.com put it in recent testimony, “The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery.”

But it’s not doing enough.

We need legislators with the courage to do what must be done. We need our "super-wealthy" to realize that they MUST be part of the solution, that the only way America can survive as a nation is if they agree that it is GOOD if they are taxed more.

We need Republicans on board with this, and that means seeking the impossible. Republicans must admit that President Ronald Reagan was wrong: Government is not the problem. Government is the solution.

If Congress doesn’t get it, we will most certainly return to a Gilded Age. Even more than we are right now. Right now, we need more stimulus money, "But can we afford to do more? We can’t afford not to," Krugman says.

Again, from Paul Krugman:

Deficit hawks like to complain that today’s young people will end up having to pay higher taxes to service the debt we’re running up right now. But anyone who really cared about the prospects of young Americans would be pushing for much more job creation, since the burden of high unemployment falls disproportionately on young workers — and those who enter the work force in years of high unemployment suffer permanent career damage, never catching up with those who graduated in better times.

Even the claim that we’ll have to pay for stimulus spending now with higher taxes later is mostly wrong. Spending more on recovery will lead to a stronger economy, both now and in the future — and a stronger economy means more government revenue. Stimulus spending probably doesn’t pay for itself, but its true cost, even in a narrow fiscal sense, is only a fraction of the headline number.

O.K., I know I’m being impractical: major economic programs can’t pass Congress without the support of relatively conservative Democrats, and these Democrats have been telling reporters that they have lost their appetite for stimulus.

But I hope their stomachs start rumbling soon. We now know that stimulus works, but we aren’t doing nearly enough of it. For the sake of today’s unemployed, and for the sake of the nation’s future, we need to do much more.

We need to do more now. Congress needs to find the courage to do it, and Republicans and Blue Dog Dems need to get it. Our nation’s economy will continue to regress and fall until they all get it.