Paul Krugman: If we can't get Obama/Congress to head off economic disaster now, what will it take?

Boiling the Frog
by Paul Krugman
New York Times
July 13, 2009

.... last winter the economy was in acute crisis, with a replay of the Great Depression seeming all too possible. And there was a fairly strong policy response in the form of the Obama stimulus plan, even if that plan wasn’t as strong as some of us thought it should have been.

At this point, however, the acute crisis has given way to a much more insidious threat. Most economic forecasters now expect gross domestic product to start growing soon, if it hasn’t already. But all the signs point to a “jobless recovery”: on average, forecasters surveyed by The Wall Street Journal believe that the unemployment rate will keep rising into next year, and that it will be as high at the end of 2010 as it is now.

Now, it’s bad enough to be jobless for a few weeks; it’s much worse being unemployed for months or years. Yet that’s exactly what will happen to millions of Americans if the average forecast is right — which means that many of the unemployed will lose their savings, their homes and more.

To head off this outcome — and remember, this isn’t what economic Cassandras are saying; it’s the forecasting consensus — we’d need to get another round of fiscal stimulus under way very soon. But neither Congress nor, alas, the Obama administration is showing any inclination to act. Now that the free fall is over, all sense of urgency seems to have vanished.

This will probably change once the reality of the jobless recovery becomes all too apparent. But by then it will be too late to avoid a slow-motion human and social disaster.

And let’s be clear: both the president and the party’s Congressional leadership understand the economic and environmental issues perfectly well. So if we can’t get action to head off disaster now, what would it take?

Please read the complete article at:

http://www.nytimes.com/2009/07/13/opinion/13krugman.html?_r=1&ref=opinion

...understand the economic and environmental issues perfectly well."

So who is right?

The have changed from predicting doom to now predicting the end of the recession. Obama's position is clear.

We will smoke this recession out!

Everyone is reading off the same numbers here. They see an army of scared centrist Democrats, libertarian, and wing-nuts on one side and an economic disaster on the other. Unfortunately, they think they are better off pitching their political tent with the ignorant masses.

It's back to pandering to the ignorant masses...the safe place to hide. Unfortunately, the ignorant masses are going to learn more and more harshly what their ignorance has netted them.

that those ignorant masses will blame Obama for bush's shit and vote in whatever doofus the republicans run next time.

Don't do anything until you absolutely have to.

Not (edited typo) a slam on the administration, if anything you could take it as a slam on republicans or congress. Much of what was in the stimulus bill was compromise to try to get bipartisan support (which didn't happen by the way). Stronger stimulus options were exchanged for weaker ones in some cases. What was most needed - point blank job creation programs, was dramatically curtailed until it represented only about a third of the total spending package.

The money for "shovel ready" projects did not include restrictions or orders on how states had to spend the money, which left the door open for governors to reject the money, or divert the money, or stall the money, etc for partisan political reasons. This has meant that the effect of many of these provisions has been even further dulled.

Now there's little to no political will for a second stimulus, because it will look like an admission that the first stimulus failed even if that's not accurate.

That's what was accomplished in the quest for bi-partisanship.

Once again:

Stating the obvious: Three Republican Senators (one of whom is allegedly now a Democrat) didn't write a plan that was designed to be a smashing success for President Obama and the Democratic Party. Does that really surprise anyone?

Leading economists, Noriel Roubini called it "puny", pointed out how weak the plan was for actual job creation when three Republican Senators gutted the House plan during conference.

And now we are paying the costs of a so-called "bi-partisan" stimulus agreement. Of course, Republicans can deny they had anything to do with it since it didn't get a single Republican vote in the House.

A powerful job stimulus plan that could have created several million useful public works/infrastructure jobs this year was not proposed the President Obama or the Democratic leadership in Congress. The sound job creation plan proposed by the U.S. Conference of Mayors was not even considered by President Obama and the Democratic congressional leadership! For less than 200 billion dollars, the federal government could have finance over 18,000 useful infrastructure and public works jobs that would have employed 2 million people. All of those projects would have been started and completed before the end of next year.

The economy needed that kind of a powerful economic jolt. This will not happen under the Republican written and Democrat endorsed stimulus plan. A real job creating stimulus plan could have been passed by the Democratic controlled congress without any Republican votes in the Senate. A real Republican "filibuster" in the Senate against an economic recovery would have ended quickly with a cloture vote. And all we needed was 50 Senate votes to pass it with Biden passing the tie-breaker.

Now it will be very difficult to pass a badly needed second stimulus bill, especially when President Obama says he opposed to one!

As the saying goes, the Democrats "blew their wad" with the first bill.

If President Obama and the Democratic Party leadership doesn't get their act together and function as if they had won the 2008 elections, and do this soon, the Republicans will regain their control of Congress and the White House by 2012 with major congressional gains in the 2010 election.

Of course, the Republicans never did lose their control of Congress .... at least it seems that way.

...in continuing UE numbers.

In that case NO ONE should have let the Obama admin say we've averted a depression because we haven't.

It was left on a boil too long. There is only a carbonized residue of frog consommé left, and a burnt smell in the air.

Very soon it will waft from the kitchen out to the dining room and then the guests will hit the exits in panic.

:rofl:

...be made known.

NO ONE is saying the banks are dead and can't function correctly, NO ONE...

Move along now, nothing to see here. The economy will be just fine. Nothing more to do. Move along now. And let's be happy!

...and no one will be singing anything.

It'd be best if Obama continually reminds America that the economy is his but he inherited this mess from conservative policies.

Bernanke was right in the begginning to capitalize the banks because they just needed enough to start lending and make up m2 capital in the GDP but now M1 is dead and there's nothing M2 can do about it.

The liver made the heart sick, now it's time to fix the heart and get a liver transplant.

And the problem is that the .gov, to a lesser extent including the Obama administration and the Democrats, but most especially including the GOP, which is completely schizo in this respect, refuses to acknowledge that loose trade policies (the whole free trade thing) has resulted in our manufacturing base being gutted, and that other industries such as finance, banking, service industries, are not able to fill in the gap and generate enough high-paying jobs and decent income to go around.

I suspect there's little we can do except hunker down and wait until more of the economy falls apart, and the government ends up with little choice except to bring an end to NAFTA and free trade, enact some trade tariffs, and let manufacturing slowly rebuild...

Until the .gov recognizes that free trade's a total clusterfuck, who knows what will happen? Maybe the economy will go back into free fall, or maybe we'll have a halting, slow, jobless recovery that brings profitability to a few assholes at the top while leaving most people still jobless or underemployed.

I still think this was planned by the neocons to bankrupt the govt. They always said that was their goal, and bush was their puppet.

...and the biggest creater of this is energy and health insurance right now.

But yes, the shipping of working class jobs offshore and the expectations of the consumer to keep going is asinine at best

...to vote for another round of stimulus. Congress? Fuggedaboutit.

To head off this outcome... we’d need to get another round of fiscal stimulus under way very soon.

How does he know being unemployed will cause them to "will lose their savings, their homes and more"? Give unemployment a chance to work Krugman!

Doom bringers and naysayers. These people on the ground don't mind more vacation time. Give us a few years to figure out if its a bad thing or not.

Roubini Sees Six More Months of Recession, ‘Shallow’ Recovery
By Eric Martin, Thomas R. Keene and Ken Prewitt
Bloomberg

July 9 (Bloomberg) -- The U.S. recession will last six more months and be followed by a “shallow” recovery, Nouriel Roubini said.

The economy contracted by 5.5 percent in the first quarter and 6.3 percent in the fourth quarter of 2008, the most since 1958, according to data compiled by Bloomberg. The savings rate reached 6.9 percent in May, the highest since December 1993, spurring concern that consumer spending will wane.

“This is a great recession that could have ended up in a near depression,” Roubini, the New York University economist who predicted the credit crisis, said on Bloomberg Radio’s “Surveillance.” “We’re not out of the woods.”

Yale University Professor Robert Shiller, speaking during the same program in New York today, said the economic crisis continues despite the $12.8 trillion pledged by the U.S. government and Federal Reserve. President Barack Obama needs to propose another stimulus plan, Shiller added.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6qhJ4aCIlD0

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Lost ‘Animal Spirits’ Worsen Economy, Roubini Says
By Eric Martin, Thomas R. Keene and Ken Prewitt
Bloomberg

July 10 (Bloomberg) -- The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.

“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said yesterday on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.

The U.S. needs another stimulus package because President Barack Obama’s initial $787 billion plan hasn’t been implemented fast enough, according to Shiller. Roubini, an economics professor at New York University, said more spending is necessary to avoid stagnation like Japan’s in the 1990s.

In 2006, Roubini predicted the credit crisis that led to $1.5 trillion in losses for financial firms. Shiller is co- creator of the national home-price index that bears his name and the author of the books “Irrational Exuberance” and, with George Akerlof, “Animal Spirits.”

The recession will probably continue for six months as companies struggle to pay their creditors, he said. The cost of protecting corporate bonds in the U.S. from default jumped to the highest in six weeks on July 8, according to Phoenix Partners Group data.

“The wave of corporate defaults is going to be massive,” Roubini said. “We’re not out of the woods.”

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aERlD846h2XY

Obama advisor Laura Tyson suggests another stimulus plan
Los Angeles Times
July 7, 2009

Laura Tyson is adding her voice to those calling for more economic stimulus spending.

The UC Berkeley economics professor, a member of President Obama’s Economic Recovery Advisory Board, said in Singapore today that the $787-billion plan Congress passed in February "will have a positive effect, but the real economy is a sicker patient."

The plan turned out to be "a bit too small," she said.

"The economy is worse than we forecast on which the stimulus program was based," Tyson told the Nomura Equity Forum. "We probably have already 2.5 million more job losses than anticipated."

"The money is just really starting to come out in more significant amounts now," Tyson said. "The stimulus is performing close to expectations but not in timing."

Billionaire Warren Buffett also recently suggested that the U.S. may need more stimulus spending.

"It looks like we’re going to need more medicine, not less," Buffett said June 24 in a Bloomberg TV interview. "We’re going to have more unemployment. The recovery really hasn’t got going."

http://latimesblogs.latimes.com/money_co/2009/07/laura-tyson-is-adding-her-voice-to-those-calling-for-more-economic-stimulus-spending--the-uc-berkeley-economics-professor.html

Labor Leaders Push Obama for Second Stimulus Package
ABC News
July 13, 2009

In a meeting with President Obama today at the White House, top labor leaders pushed for a second stimulus package to create more jobs.

“Since the onset of the recession, this country has lost an astounding 6.5 million jobs and $14 trillion in wealth. We support the President's recovery and reinvestment program, and we believe it should be substantially reinforced with more stimulus, creating millions of good jobs that cannot be outsourced,” the National Labor Coordinating Committee (NLCC) said in a statement after the meeting.

A labor official said Obama did not commit to any future stimulus package.

A labor official said the leaders conveyed their support for the including three key elements in a health care bill: an employee mandate, a public insurance option and no taxing of health care benefits.

There was no firm commitment from the White House on these issues and the message was familiar – Congress is still working on the legislation and the White House is not drawing lines in the sand at this point.

Full list of Participants:
Change to Win Chair Anna Burger
AFL-CIO President John Sweeney
National Education Association President Dennis Van Roekel
Service Employees International Union President Andy Stern
United Food and Commercial Workers President Joe Hansen
Laborers International Union of North America President Terry O’Sullivan
International Brotherhood of Teamsters President Jim Hoffa
American Federation of State, County and Municipal Employees President Gerry McEntee
American Federation of Teachers President Randi Weingarten
United Auto Workers Secretary-Treasurer Elizabeth Bunn
United Steelworkers President Leo Gerard
International Brotherhood of Electrical Workers President Ed Hill
Communication Workers of America President Larry Cohen
American Rights at Work Chair David Bonior

Please read the complete article at:

http://blogs.abcnews.com/politicalpunch/2009/07/labor-leaders-push-obama-for-second-stimulus-package.html

Only 10 percent has been pushed out. So what good is a second one going to do if the first is barely out the door?

What good is a second one? Well, we need one that is mainly directed toward creating several million useful public works and infrastructure projects and that can do it very fast. Parts of the current stimulus plan won't even take effect until 2011, 2012 and 2013!

The U.S. Conference of Mayors prepared an excellent recovery plan at the beginning of the year. It detailed over 18,000 projects that could be started and completed before the end of next year. Their plan cost less than 200 billion dollars and would have employed about 2 million workers.

Unfortuntely their plan was all but ignored by Congress and the White House. Members of Congress and Governors didn't like the uppity mayors, those closest to the people, messing with their financial turf.

I'd like to see the Mayor's recovery plan adopted along with some additional quick shovel ready projects that won't be tied down in months and months of bureaucratic red tape and delays.

There is money in the current package for that kind of work. But its still taking a while to approve projects and get the money out.

Also that plan from the mayors wasn't ignored. They are going through and approving which projects are waste and which ones are ready to go now. Thats whats taking so long to get the money out. The Mayors Project was full of waster projects. Like building waterfalls.

I read the detailed list of ALL the projects for my entire state and could not find one that was not a useful public works project. I couldn't find a single "make work" project that didn't meet some real human need or want.

Not a one.

And out of those over 18,000 total projects proposed by the nations mayors, I believe Republicans found a grand total of 3 they didn't like! And they used that to attack and bury ALL of the mayors recovery program projects!

Only a tiny fraction of the Mayor's projects have been approved by the states. Far less than 10% will ever be funded .... there just isn't enough money to cover the mayors projects and most of the actual job creating stimulus money will be going for state projects.

If the Mayor's got the funding they requested you would have hundreds of thousands of people working on thousands of ready to go go "new" public works projects across this land right now.

It ain't happening!

And that's why we need a massive economic job recovery project that will do the job and create the several million jobs that need doing!

If the unemployment rate doesn't go down a lot by next years election and if a comprehensive health plan with a strong public option is not functioning next year, the Democrats will be toast. The Republicans will regain control of Congress and the White House.

Most of us who aren't political novices now understand. Krugman has a valid reason to be worried.

Half the park system and hundreds of parks are from the "make work" program from the last depression. I would rather the money go directly from the government to the workers than be filtered through the funds to remodel some wall street assholes summer home. We don't need more banks. We need more bridges, roads, re-built sewer lines, and how about a CCC to build passenger rail and then run it. Or how about a nation wide wireless system?

You are right. If we don't have a good (not the crap they are passing) health care plan and low unemployment by 2012, we will get another neocon republican in the white house. The republicans know this and will not cooperate with the WH to get anything good done. They know that they can stop up the works and Obama will get the blame. Bypass them now. If you give them another two years of bipartisanship, they will get another 8 years in the WH.

Obama needs to call Krugman to the WH on the economy. He needs to call Dean on health care. That is how we will get out of this and avoid losing in 2012.

I've never thought of the kinds of jobs created by the government during the Great Depression as useless "make work" jobs that really don't provide any kind of public benefit or service.

But the right-wing tries to denigrate those jobs by calling them "make work".

Obama needs a "people's stimulus." One geared to large and job-producing programs rather than business-heavy "incentives". In other words, he should have listened to Krugman and others the first go around. It's okay....I love Obama, some people just freak out at the slightest criticism of our president. Yes, he's disappointed me on a few issues, but he's move us forward on many others as well. But the fact is, he COULD learn a lot from FDR.

you HAVE to take physical, real world stuff & create jobs. Even with debt high as it is, you need to do this. & Goldman Such's(typo fits yes?) has now made a horrendous amount of money-it's just like I said it was in another thread: this "profit" & the so-called "debt" is fake. It's just numbers on paper. Tell me, explain to me HOW that firm could go all the way across from a negative # to a positive #? Someone who knows Wall Street/banking?

Obama can only work with the Congress he has, and he's stuck with a spineless one. The grassroots needs to focus on replacing Blue Dogs with Liberals.

As FDR said: "I agree with what you, now come and make me do it". Obama clearly said, it's not about him, it's about US, we have to get off our asses and push liberal positions and candidates and KEEP ON PUSHING. That is something the Obama-bashers forget, We have to push things on the grass-roots level for real-lasting change, he should know, he was a community organizer.

at least hear out people like Krugman instead of listening only to Goldman Sachs cronies.