Why We Need Another Stimulus Bill Hot

Political forces make it impossible for the Obama Administration to put forward another stimulus bill. Obama’s already facing the possibility of losing control of the House of Representative in November’s midterm elections. Democrats now have 257 seats in the House, 39 more than minimum needed for control.

But midterm elections can be unkind to first-term Presidents. So it is politically untenable for President Obama to risk losing more seats in the House by proposing more economic stimulus spending—even if that’s what history shows is the right thing to do

Krugman won the 2008 Nobel Prize for economics for his contributions in the field of international economics, not for his work on financial crises. But he’s studied the history of bubbles.

Moreover, he has some smart friends who are known for their work on economic crises: Krugman was recruited to join Princeton in 2000 by the chairman of the school’s economics department, who had written extensively about the causes of The Great Depression—current Fed Chairman Ben Bernanke.    

With consumer confidence, housing, jobs and other leading indicators telling us the economy is getting weaker, I think Krugman is right.

The government needs to create a long-term plan for fixing Social Security and closing the deficit. But now is not the time for austerity measures.

The $700 stimulus kept the world economy from disaster. But without another stimulus, we could be subjected to the same kind of economic malaise that’s gripped for the last two decades.

The Great Depression was worsened by Herbert Hoover’s distaste for government spending and regulation, and he is remembered as one of the most unpopular president in American history.

The Depression was ended by government spending on World War II. We know that.

Yet political realties seem to doom us to repeat the same mistakes as Hoover.

Is Krugman right? Do we need another stimulus? How could we ignore lessons of the past?

Charlie Rose’s 29-minute interview of Paul Krugman.

This Website Is For Financial Professionals Only