Krugman Told Us So -- Too Small Stimulus Package Proving Inadequate to Turn Economy Around

by Bartleby | Back when the stimulus bill was still being debated, Paul Krugman worried that Obama's plan would prove inadequate to get the economy moving, and that Obama would eventually find himself in the untenable position of having to ask for another stimulus.  [See:  Swift, Bold Action Required: Krugman; The Economic "Stimulus" Package; Krugman on the Stimulus Package: It's Too Little. Will Obama Realize This Too Late?]  Once again, it looks as if Paul Krugman has been right all along and Obama's advisors, wrong.

Today Krugman writes:

"As soon as the Obama administration-in-waiting announced its stimulus plan — this was before Inauguration Day — some of us worried that the plan would prove inadequate. And we also worried that it might be hard, as a political matter, to come back for another round.

"Unfortunately, those worries have proved justified. The bad employment report for June made it clear that the stimulus was, indeed, too small. But it also damaged the credibility of the administration’s economic stewardship. There’s now a real risk that President Obama will find himself caught in a political-economic trap....

"As I said, I was afraid this would happen. But that’s water under the bridge. The question is what the president and his economic team should do now....

"[T]here’s a difference between defending what you’ve done so far and being defensive. It was disturbing when President Obama walked back Mr. Biden’s admission that the administration “misread” the economy, declaring that “there’s nothing we would have done differently.” There was a whiff of the Bush infallibility complex in that remark, a hint that the current administration might share some of its predecessor’s inability to admit mistakes. And that’s an attitude neither Mr. Obama nor the country can afford.

"What Mr. Obama needs to do is level with the American people. He needs to admit that he may not have done enough on the first try. He needs to remind the country that he’s trying to steer the country through a severe economic storm, and that some course adjustments — including, quite possibly, another round of stimulus — may be necessary."  (NYT)

It remains to be seen whether Obama and his team will take Krugman's suggestion and talk to the American people like adults.

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