{"id":2800,"date":"2009-01-11T00:05:50","date_gmt":"2009-01-11T05:05:50","guid":{"rendered":"http:\/\/1boringoldman.com\/?p=2800"},"modified":"2009-01-11T03:08:40","modified_gmt":"2009-01-11T08:08:40","slug":"clash-of-the-titans","status":"publish","type":"post","link":"https:\/\/1boringoldman.com\/index.php\/2009\/01\/11\/clash-of-the-titans\/","title":{"rendered":"clash of the titans…"},"content":{"rendered":"
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The Obama Gap<\/b><\/font><\/a>
By PAUL KRUGMAN
January 8, 2009<\/p>\n

\u00e2\u20ac\u0153I don\u00e2\u20ac\u2122t believe it\u00e2\u20ac\u2122s too late to change course, but it will be if we don\u00e2\u20ac\u2122t take dramatic action as soon as possible. If nothing is done, this recession could linger for years.\u00e2\u20ac\u009d<\/p>\n

So declared President-elect Barack Obama on Thursday, explaining why the nation needs an extremely aggressive government response to the economic downturn. He\u00e2\u20ac\u2122s right. This is the most dangerous economic crisis since the Great Depression, and it could all too easily turn into a prolonged slump. <\/p>\n

But Mr. Obama\u00e2\u20ac\u2122s prescription doesn\u00e2\u20ac\u2122t live up to his diagnosis. The economic plan he\u00e2\u20ac\u2122s offering isn\u00e2\u20ac\u2122t as strong as his language about the economic threat. In fact, it falls well short of what\u00e2\u20ac\u2122s needed.The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job.<\/div>\n
…<\/b><\/div>\n
Why isn\u00e2\u20ac\u2122t Mr. Obama trying to do more?<\/div>\n

Is the plan being limited by fear of debt? There are dangers associated with large-scale government borrowing \u00e2\u20ac\u201d and this week\u00e2\u20ac\u2122s C.B.O. report projected a $1.2 trillion deficit for this year. But it would be even more dangerous to fall short in rescuing the economy. The president-elect spoke eloquently and accurately on Thursday about the consequences of failing to act \u00e2\u20ac\u201d there\u00e2\u20ac\u2122s a real risk that we\u00e2\u20ac\u2122ll slide into a prolonged, Japanese-style deflationary trap \u00e2\u20ac\u201d but the consequences of failing to act adequately aren\u00e2\u20ac\u2122t much better. <\/p>\n

Is the plan being limited by a lack of spending opportunities? There are only a limited number of \u00e2\u20ac\u0153shovel-ready\u00e2\u20ac\u009d public investment projects \u00e2\u20ac\u201d that is, projects that can be started quickly enough to help the economy in the near term. But there are other forms of public spending, especially on health care, that could do good while aiding the economy in its hour of need.<\/p>\n

Or is the plan being limited by political caution? Press reports last month indicated that Obama aides were anxious to keep the final price tag on the plan below the politically sensitive trillion-dollar mark. There also have been suggestions that the plan\u00e2\u20ac\u2122s inclusion of large business tax cuts, which add to its cost but will do little for the economy, is an attempt to win Republican votes in Congress. <\/p>\n

Whatever the explanation, the Obama plan just doesn\u00e2\u20ac\u2122t look adequate to the economy\u00e2\u20ac\u2122s need. To be sure, a third of a loaf is better than none. But right now we seem to be facing two major economic gaps: the gap between the economy\u00e2\u20ac\u2122s potential and its likely performance, and the gap between Mr. Obama\u00e2\u20ac\u2122s stern economic rhetoric and his somewhat disappointing economic plan.<\/div>\n<\/blockquote>\n
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\u00e2\u20ac\u02dcIf Paul Krugman has a good idea\u00e2\u20ac\u00a6<\/font><\/a><\/b><\/div>\n
then we\u00e2\u20ac\u2122re going to do it\u00e2\u20ac\u2122…<\/font><\/a><\/b><\/div>\n

<\/p>\n

Nobel Prize-winning economist Paul Krugman has been a frequent critic of President-elect Obama. During the primary season, he faulted Obama for saying there is a Social Security \u00e2\u20ac\u0153crisis,\u00e2\u20ac\u009d refusing to adopt a mandate in his health care proposals, and not fighting enough on \u00e2\u20ac\u0153partisan issues.\u00e2\u20ac\u009d In fact, today in his New York Times column, Krugman expresses skepticism at the effectiveness of Obama\u00e2\u20ac\u2122s stimulus plan, in particular his tax cuts for businesses: <\/div>\n