Obama mentioned aid to state and local governments in his press conference yesterday. Indeed. This is a very quick form of fiscal stimulus, because it’s not about starting new spending, it’s about sustaining current spending. It should be done immediately.
And in a separate post on Saturday, he wrote:
Implications for Obama: be inspired by FDR, but don’t imitate him slavishly. In particular, your economic policy should be bolder, not more cautious.Of course, no mention by Krugman as to how these "bolder" spending programs are to be paid for.
Krugman, btw, in part justfies this spending binge because he says that we are headed toward a zero interest rate policy, which means he has no idea what the Fed is really up to.
State and local governments spending were bloated during the bubble with lots of wasteful and fraudulent spending and now Krugman wants to keep that spending going even if the local taxpayers can’t afford it so they will shift the burden onto the debt burden of federal taxpayers.
ReplyDeleteThis matches up with Paulson’s plan to throw money at the banks who made bad loans or investors who made bad investments so they can keep on making bad loans and making bad investments.
The whole “rescue” effort consists of desperate attempts to keep the same bad practices going that caused the problems to begin with. And the methods used in the bailout is the same, using massive loans to “invest” in questionable economic activity while keeping what is really happening hidden in complex deals which are protected by confidentiality agreements.
Even if all the Kings men and all the Kings horses manage to put Humpty Bubbly Dumpty back together again, then we are back where we started with huge parts of the economy being side tracked into uneconomic activity using massive amounts of borrowed money but this time even deeper in debt.
DJ
DJ,
ReplyDeleteYou are absolutely correct. And it looks like it is going to get a lot worse:http://www.economicpolicyjournal.com/2008/11/obama-planning-big-bang-economic.html