World

An average guy (me) tries to get a sense of the correct path to take during this financial crisis by reading economists who disagree.

Paul Krugman wants quick massive government spending ($800B) to prevent a US depression (Fighting Off Depression). I think that on the surface it sounds good. I like the idea of shortening the pain, turning things around and getting on with doing good works. But, then I think about the management of that huge sum of money, hmmm. The unintended consequences to the US boggle the mind. I am unconvinced.

Then at nakedcapitalism.com a post titled Willem Buiter Calls for Less US Stimulus, Expects Collapse in Price of Dollar Assets. Where Willem Buiter wants much less government spending ($300B) and places the US in context of the world economy. His point being that the US is near it's financial ceiling and thanks to Bush there is little to no trust or good will among the nations of the world toward the US. Therefor the US has to pay "the going rate" for international monetary support which in turn will lead to in 2 to 5 years a worldwide collapse of dollar backed assets, a sharply devalued dollar and corresponding US inflation.

Buiter does not address jobs and employment during this time frame as I suspect it does not fit easily into his world view.

Then Krugman responds with Faith-based macroeconomics. Krugman asks a good question:

But on the stimulus point: even if you're deeply concerned about America's future solvency, will going for, say, a $300 billion stimulus rather than an $800 billion stimulus do anything significant to help?

Today I read that President-elect Obama is proposing a ($300B) tax cut as part of the stimulus package. This I think is right and important.

The largest piece of tax relief in the new plan would involve cuts for people who pay income taxes or who claim the earned-income credit, a refund designed to lessen the impact of payroll taxes on low- and moderate-income workers. This component would serve as a down payment on the "Making Work Pay" proposal Mr. Obama outlined during his election campaign, giving a credit of $500 per individual or $1,000 per family.

This will get money into the hands of people who can use it. The next part I want to hear about is getting people working at a livable wage and then health care for everyone.

At this point I think President-elect Obama has a better vision than the Economists.