Krugman: This is Not a Recovery

[flpoljunkie]

August 26, 2010

This Is Not a Recovery
By PAUL KRUGMAN

What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.

But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.

The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.

All of this is obvious. Yet policy makers are in denial.

So what should officials be doing, aside from telling the truth about the economy?

The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.

The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?

Which of these options should policy makers pursue? If I had my way, all of them.

http://www.nytimes.com/2010/08/27/opinion/27krugman.html?hp

[xchrom]

1. Recommend

[ProSense]

2. And the reality is:

Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.

One thing is certain, calling out Republicans is important, but if they make significant gains in November, it's not going to get any easier.

[mkultra]

3. if he calls for a second stimulus and the thugs block

It will be to their detriment.

[ProSense]

4. Republicans don't care.

They'll do whatever it takes to obstruct.

[TheKentuckian]

5. Make them do it then and keep making them do it.

Real bills with the ability to have impact. Make the media talk about it keep the story going.

Go nuclear on their ass if it comes to it.

[ProSense]

6. Yeah, let's see

what happens with the small business jobs bill.

Let's hope it doesn't go the way of unemployment and the state aid bill.

Make them do it is a good concept, that is until people begin to abandon Dems when nothing is getting done.

In theory, one would expect Republicans to shoulder the blame, but it never seems to work out that way. As for the media, they're useless.

[TheKentuckian]

7. Nothing gets done that gets any credit because there is no impact

You think that little bill is going to win elections or produce jobs on a level to even make the needle move?

You think that if you "get something done" that it is a win but something is a drop in the ocean that only impresses those that don't need to be sold.

We have bombers that cost as much as your "jobs" bill.

[ProSense]

9. They add up.

The President may not be able to get a $100 billion or $200 billion stimulus package through, but he can get targeted stimulus ($26 billion for state aid and $30 billion for small businesses).

[totodeinhere]

8. If you are looking to help Democratic chances in November, it's too late for any new stimulus

to help anyway. Even if they could pass one tomorrow, it would take until sometime after the election for it to kick in and be noticeable to the voters.

[mkultra]

10. based on your logic, the recent stimulus hasnt kicked in either