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Krugman: No Great Depression, But Government Must Spend Like Crazy

krugman-190.jpgNobel Laureate and NYT columnist Paul Krugman says, optimistically, that we're not looking at the next Great Depression and that we won't even hit the 1982 unemployment highs of 10.7%. Phew. BUT: We're still facing Depression Economics, by which the traditional policy tools government might use to jolt things no longer work.

His solution? (Hint: He's helping to lay the groundwork for Obama's actions)

  • A large stimulus package (duh)
  • A swath of aid specifically targeted at the distressed (double duh)
  • And now's not the time to worry about deficits

So what's the number he's looking for?

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?

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Let’s hope that the answer to that question is yes, that the new administration will indeed be that daring. For we’re now in a situation where it would be very dangerous to give in to conventional notions of prudence.

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