Worrying about the Economy

Here is a posting by Paul Krugman on his NY Times blog with his worries about the economy:

So we’re something like 8 percent below where we should be. That translates into lost output at a rate of well over a trillion dollars per year (as well as mass unemployment). And we’ll keep suffering those losses, even if GDP is now growing, until we have enough growth to close that gap. Since there’s nothing in the data or anecdotal evidence suggesting any gap-closing in progress, this is a continuing tragedy.

And that’s assuming that we don’t have any backsliding, aka a double-dip recession.

There’s a tendency to treat worries about a double dip as outlandish, as something only crazy people like the people who, um, predicted the current crisis worry about. But there are some real reasons for concern. One is that the lift from fiscal stimulus will start to fade out in a couple of quarters. Another is that, as Yellen points out, most of the boost we’re getting now is tied to inventories. And that’s a one-time thing.

...

In a rational political and policy environment, the implication of all this would be clear: we need more stimulus. Yes, it would add to federal debt — but isn’t that worth doing to help reduce an output gap that’s wasting our potential at the rate of more than a trillion dollars a year?

Apparently not.

The Bush era was one of profound ignorance based on a "faith-based" approach to war, economics, and hurricane relief. The Obama era promised a rational approach to these areas, but the delivery has been more promise than reality.