Krugman is correct but he's not right! He is brilliant on economics, naive on GOVERNANCE!

[ProSense]

34. The single

fact in this entire debate is that the stimulus was too small.

Too Little of a Good Thing

By PAUL KRUGMAN

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

And the really bad news is that “centrists” in Congress aren’t able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation.

About that good news: not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

The stimulus didn’t completely eliminate these effects, but it was enough to break the vicious circle of economic decline. Aid to the unemployed and help for state and local governments were probably the most important factors. If you want to see the recovery act in action, visit a classroom: your local school probably would have had to fire a lot of teachers if the stimulus hadn’t been enacted.

And the free fall has ended. Last week’s G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent. As Mark Zandi of Moody’s Economy.com put it in recent testimony, “The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery.”

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http://www.nytimes.com/2009/11/02/opinion/02krugman.html?_r=1

The arguments around why are fairly subjective, especially those that imply Republicans would have voted for a larger package.

More Krugman:

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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.

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