Monday, January 14, 2008

Krugman reviews presidential candidates' stimulus plans

Over the last week all of the presidential aspirants, as well as the current occupant of the Oval office, have acknowledged that the economy is either in a recession or on the verge of one.

Today's report that consumer spending, particularly high end consumption, has declined, is the latest indication that the economy is in trouble.

The sharp decline in spending is particularly ominous since this economic expansion was driven almost entirely by consumer spending (as opposed to business investment) that seemed impervious to declining real wages and stagnant family income. Of course, we now know that much of that spending was financed by the real estate bubble as homeowners refinanced their homes, using the proceeds for consumption, now almost 70% of the entire economy, a historic and unsustainable high.

All of the leading presidential candidates now recognize that the nation's economy has deteriorated sufficiently to require a federal response.

Most economists agree that tax cuts are not nearly as effective a stimuli as increased federal spending on unemployment compensation, food stamps, direct financial aid to states and infrastructure investment.

Paul Krugman's latest column which reviews the stimulus proposals of all of the leading Presidential candidates is linked.

1 comment:

Chuck said...

An interesting and revealing comparison. Perhaps those who have jumped on bandwagons should reconsider, reserving their judgements until there is commitment beyond the rhetoric on this very important issue s well as all the other very important issues.