Monday, May 11, 2009

Shortfall

The economy shows, according to various ostensibly independent news reports, some signs of recovery. New unemployment claims are down. That doesn't mean that anyone has got a new job yet; it just means that though the disaster is larger each week, the rate of increase of the disaster has subsided somewhat. One note that is usually struck -- we no longer seem to be in free-fall. I'm inclined to agree. We are a little more knowledgeable than we were in FDR's day, but we aren't doing much better on the political score.

The fiscal conservatives, among whom I usually reside, have started to claim that this recovery is proof that we didn't need to spend so much money. On the contrary, my sensible friends, think about it this way. The economy is underperforming by about $1T per annum. We are spending about $0.4T this year and next year to purchase this reserve capacity. The difference of $0.6T is the part that will be translated into joblessness and various other forms of human suffering.

In February, Media Matters identified a few economists who agreed that the stimulus was too small -- too small by far. I have followed up to see whether they still seem to feel that way. Yes they seem to. Here are some links for those listed.

Eileen Appelbaum - visiting professor at Rutgers, New Brunswick
Dean Baker - Center for Economic and Policy Research
J. Bradford DeLong - professor at UC Berkeley, visiting scholar SF Federal Reserve
James K. Galbraith - Levi Institute, Bard College
Paul Krugman - Princeton and NYTimes (China speech here)
Joseph Stiglitz - Nobel Laureate
Mark Zandi - Moody's ( here, and here as well)

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