Pastor of Muppets (syndicalist) wrote in ontd_political,
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Obama adviser agrees with Krugman: US needs another stimulus package

This made the local news this morning, and the anchors were reporting it like, "Good Christ, ANOTHER stimulus?? *eyeroll* Those wacky tax-and-spend liberals! When will they stop???"

Paul Krugman, Dean Baker, James K. Galbraith, and others all maintained the first stimulus was not big enough to do a good job.



Tyson Says U.S. Should Mull Second Economic Stimulus (Update3)
By Shamim Adam

July 7 (Bloomberg) -- The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an outside adviser to President Barack Obama.

House Majority Leader Steny Hoyer said today “we need to be open to whether or not we need additional action” on an economic stimulus.
Speaking in Washington, he cautioned, though, that it is “too early” to assess whether the current stimulus plan is succeeding.

White House spokeswoman Jen Psaki sought to dampen talk of a second stimulus plan.



“We remain focused on putting thousands of Americans back to work through the implementation of the recovery act and any discussion of a second stimulus is premature at this point,” Psaki said in an e-mailed statement.

Tyson, in a speech in Singapore today, said the current plan “will have a positive effect, but the real economy is a sicker patient.” The [current] package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.

Tyson’s comments contrast with remarks made two days ago by Vice President Joe Biden and Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.

10 Percent Unemployment

Obama said last month that a second package isn’t needed yet, though he expects the jobless rate will exceed 10 percent this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8 percent.

Unemployment increased to 9.5 percent in June, the highest since August 1983. The world’s largest economy has lost about 6.5 million jobs since December 2007.

“The economy is worse than we forecast on which the stimulus program was based,” Tyson, who is a member of Obama’s Economic Recovery Advisory board, told the Nomura Equity Forum. “We probably have already 2.5 million more job losses than anticipated.”

Republicans, including House Minority Leader John Boehner of Ohio, seized on the latest labor numbers to attack the Obama administration’s handling of the economy.

Pace of Spending

Even Democrats have bemoaned the pace of the package’s implementation. Hoyer, a Maryland Democrat, said on “Fox News Sunday” June 5 that congressional Democrats are “disappointed” stimulus funds weren’t distributed faster.

“The money is just really starting to come out in more significant amounts now,” said Tyson, who was head of the National Economic Council in President Bill Clinton’s administration. “The stimulus is performing close to expectations but not in timing.”

Tyson, 62, later told reporters that the U.S. can afford to pay for a second package, even as the fiscal deficit soars. She said the budget shortfall is “likely to be worse” than the equivalent of 12 percent of gross domestic product that the administration forecast for 2009 and the 8 percent to 9 percent it projected for next year.

The professor at the University of California’s Walter A. Haas School of Business played down worries from China and other countries with dollar reserves that the U.S. will let inflation soar as the deficit expands.

‘Inflate Away’ the Debt

“The concern is that the U.S. will have to inflate away its debt. I do not think that is a valid concern,” she said. “The Federal Reserve is not going to let the U.S. government inflate away its debt.”

The U.S. needs to communicate its determination to reduce the annual shortfall once the economy recovers, she said.

While unemployment is worsening, other data have shown the economy is improving. U.S. manufacturing shrank last month at the slowest rate since August, according to the Institute for Supply Management’s factory index, and a measure of pending home sales advanced in May for a fourth month.

Tyson said the U.S. should shift away from its dependence on consumption to grow, and promote expansion through investment and exports. The dollar will need to weaken in the longer term to promote export-led growth, she said.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
Last Updated: July 7, 2009 12:26 EDT




http://www.bloomberg.com/apps/news?pid=20601087&sid=abAArugS6gOU#
Tags: economy
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