It's Time for a New Round of Stimulus To Avert A Depression

[Better Believe It]

Time for a New Round of Stimulus
by Katrina vanden Heuvel
The Nation
June 5, 2009

"We might be witnessing the mother of all jobless recoveries."
That's how economist Bernard Baumohl described today's jobs report to the New York Times.

While there were "only" 345,000 jobs lost last month--as compared to 504,000 in April--the report doesn't account for the upcoming job losses as well as the ripple effect that will result from the GM bankruptcy. Nor does it reflect the severe budget shortfalls states continue to face. It did, however, reveal a continued collapse of wage growth, the highest unemployment rate in 25 years, and the loss of 156,000 manufacturing jobs.

Economic Policy Institute economist Heidi Shierholz writes today, "It is only in the midst of a historically steep recession that losing 345,000 jobs in a single month is actually taken as a good sign.... The US labor market is still hemorrhaging jobs. With the continued loss of jobs and hours along with the collapse of wage growth, it is time to start thinking very seriously about additional stimulus spending."

In fact, the Center for Economic and Policy Research (CEPR) is maintaining an "honor roll" of economists who have called for another stimulus "in an effort to promote forward thinking...and challenge those who have not yet faced up to the severity of the current recession."

As economist and Nation contributor, Jamie Galbraith, wrote me in an e-mail: "This crisis is, above all, a crisis of unemployment, of foreclosures, and--as we see in California--of the essential services, including healthcare, that state and local governments provide. None of these will be remedied fast enough by the stimulus already in the pipeline. New, stronger, better targeted and faster-acting measures are needed, including general revenue sharing, a national infrastructure fund, a housing program and publicly-funded health care."

It is indeed a time for vigor. In the absence of consumer spending and business investment, the government must step in and use these deficits in order to avert a depression. Our greatest deficit, after all, is our public investment deficit.

Please read the complete article at:

http://www.thenation.com/blogs/edcut/441525/time_for_a_new_round_of_stimulus

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Press Release
Economists Who Make the Third Stimulus Honor Roll
May 27, 2009

The country is experiencing the worst economic downturn since the Great Depression. The economics profession bears part of the blame – almost the entire profession was unable to see an $8 trillion housing bubble. Even as the unraveling of the bubble began to throw the economy into recession, economists were slow to recognize the need for a strong response from the government to boost the economy.

This failure of the economics profession allowed the first stimulus, passed during the Bush administration in February of 2008, to consist of a relatively modest tax cut that provided limited benefit to the economy. Congress passed a considerably larger stimulus in February of 2009, but one that is still far too small to address the severity of the downturn.

Congress will be more likely to move on a third stimulus when economists recognize and speak out about the inadequacy of the second stimulus. In an effort to promote forward thinking by economists, and challenge those who have not yet faced up to the severity of the current recession to examine economic developments more closely, CEPR is keeping an honor roll of economists calling for a third stimulus.

Below are two lists of economists - the first includes those economists who publicly and explicitly stated that the second stimulus, the American Recovery and Reinvestment Act, was too small. The second list shows those economists who have called for a third round of stimulus to boost the economy.

Second Stimulus Too Small
Economist Date Reference

Brad DeLong 02/14/09 Blog Post
Mark Zandi 02/15/09 Op-Ed
John Schmitt 02/15/09 Op-Ed
Dean Baker 02/16/09 Op-Ed
James K. Galbraith 02/16/09 Op-Ed
Paul Krugman 02/17/09 CNBC
Heather Boushey 02/18/09 CNS News
Joseph Stiglitz 02/19/09 Columbia University
Eileen Appelbaum 02/22/09 Tavis Smiley Show
Mark Weisbrot 02/25/09 Op-Ed
Nouriel Roubini 03/05/09 Op-Ed
Robert Solow 03/12/09 BusinessWeek
Mark Thoma 03/16/09 Op-Ed



Need a Third Stimulus
Economist Date Reference

Heather Boushey 02/18/09 CNS News
James K. Galbraith 02/25/09 MarketWatch
Martin Feldstein 03/03/09 Op-Ed
Paul Krugman 03/11/09 CNBC
Mark Zandi 03/11/09 MoneyNews
Mark Thoma 03/16/09 Op-Ed
Dean Baker 03/17/09 CEPR Paper
Heidi Shierholz 04/03/09 EPI Jobs Picture
Robert Solow 04/06/09 Gainesville Sun (FL)
Mark Weisbrot 04/14/09 Op-Ed
Robert Shiller 04/15/09 Op-Ed
Gerald Friedman 05/01/09 Dollars&Sense
Lawrence Mishel 05/21/09 EPI

http://www.cepr.net/index.php/press-releases/interactive-press-releases/economists-who-make-the-third-stimulus-honor-roll/

[anonymous171]

1. 3rd Stimulus should incude: Increase in Federal Minimum wage and Protectionism.

Also UHC would be good too.

[Davis_X_Machina]

2. Not going to happen.

We've gotten all the stimulus we're going to get, federal and state, and as a practical matter, the oil-price rollback that was the biggest stimulus of all is over.

Basically, we're doomed. I don't expect to ever see a U6 of less than 15% again in my lifetime, and I'm 52.

The 'governments should be run like families, paying all their bills every month' trope is too deeply entrenched to be overcome. Some ideas are more durable than even the collapse of the structures that generate them, and that they explain.

People faced with a stark choice of their prejudices, or reality, will choose their prejudices every time.

[tabatha]

6. Nope - it has not all gone out yet.

[Better Believe It]

7. Not much real job creating stimulus in the package three Republican Senators wrote

They pretty much gutted the stimulus plan first proposed by the House.

And we only need 51 votes to pass a meaningfull stimulus package that could have created a few million shovel ready public works projects.

Roubini called the so-called stimulus "puny".

[Davis_X_Machina]

11. The first stimulus had to fail...

...and so it had to be kept too small. If it worked, Obama'd look good. Even if it almost worked, he'd have a shot at a second one.

But if it didn't do the trick, and manifestly so, taking Congress back* in 2010 would be much easier, and next. President Collins wins in 2012 in a walk.

*GOP plus Blue Dogs, the real governing coalition....

[notesdev]

15. Small?

$800 billion is not small. That's a figure of the same order of magnitude as the entire Federal Income Tax receipts for an entire year!

Then when you throw in the $10 trillion plus Federal Reserve activity and programs like TARP ... no sir, this attempt to juice the economy with 'free' money was not small at all. "Staggeringly large" is the proper description of these actions.

[Davis_X_Machina]

16. Small. As in too small by a factor of 2

The GDP gap predicted at the time of the legislation -- and things aren't that different today, unemployment is actually worse than projected -- was 2-3 times the size of the stimulus, and any multiplier effect is less than x2...

So, too small.

[leftstreet]

3. Round Three needs to go directly to the people

snip

As economist and Nation contributor, Jamie Galbraith, wrote me in an e-mail: "This crisis is, above all, a crisis of unemployment, of foreclosures, and--as we see in California--of the essential services, including healthcare, that state and local governments provide. None of these will be remedied fast enough by the stimulus already in the pipeline. New, stronger, better targeted and faster-acting measures are needed, including general revenue sharing, a national infrastructure fund, a housing program and publicly-funded health care."

yep

[anonymous171]

5. Just like the 2nd New Deal. nt

[Demeter]

4. The Only Stimulus Needed Is Upon Wall Street--The Stimulus of Fear

Fear for their lives, such that they give up their jobs, their power and their obscene wealth.

[Joanne98]

8. I agree but what to we do about the bond bastards?

[Better Believe It]

9. Screw them!

[Deja Q]

10. In the last 8 years, how many recoveries were "jobless recoveries"?

Which really isn't a recovery as far as America's budget is concerned... and such a budget is only whined when a Democrat is in office; no republicant whispered a syllable during Reagan or Bush...

[bbinacan]

12. Why in the hell

do we need another stimulus when we haven't spent the current one? I heard somewhere that 560 billion will not be spent until 2010.

[Better Believe It]

14. Only a small fraction of that will be spent for infrastructure and public works

and most of that small fraction won't be spent until 2010 or later as you point out.

We need a significant public works program that will quickly put people to work on useful projects.

The U.S. Confererence of Mayors economic recovery proposal that would have resulted in over 18,000 public works and infrastructure projects that would have been completed by the end of 2010, employing over two million people and costing about 200 billion dollars was ignored by Congress and the White House.

That was the kind of stimulus we can believe in.

[BlooInBloo]

13. Teh stupid. It burns!

[undeterred]

17. Where the hell is Round 1?

This morning I heard that there was a large amount of stimulus money handed over to Northern Trust Bank in Chicago- a bank which didn't want it and tried to return it. Meanwhile banks in poor communities were totally ignored.

This top down stimulus aint working for most people.