Krugman: Everything old is new again
The good news is that Krugman doesn't expect unemployment to rise above 10%. Yay! Here's the meat of his column:
When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.
In normal times modesty and prudence in policy goals are good things. Under current conditions, however, it’s much better to err on the side of doing too much than on the side of doing too little. The risk, if the stimulus plan turns out to be more than needed, is that the economy might overheat, leading to inflation — but the Federal Reserve can always head off that threat by raising interest rates. On the other hand, if the stimulus plan is too small there’s nothing the Fed can do to make up for the shortfall. So when depression economics prevails, prudence is folly.
What does all this say about economic policy in the near future? The Obama administration will almost certainly take office in the face of an economy looking even worse than it does now. Indeed, Goldman Sachs predicts that the unemployment rate, currently at 6.5 percent, will reach 8.5 percent by the end of next year.
All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.
So the question becomes, will the Obama people dare to propose something on that scale?
Well, we can certainly hope so.
Somehow, though, I'm not sure how what Krugman is saying, and Obama's "visionary minimalism" match up. We'll have to wait and see.
NOTE If they're pushing Hillary for State, that means they don't want her anywhere near either health care or HOLC. That's bad for me, and people like me.