The Economy: Meet the Good News, Same As the Bad News

Paul Krugman, "Too Little of a Good Thing

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that's also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we're looking at many years of high unemployment.

And the really bad news is that "centrists" in Congress aren't able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation ....

.... Last week's G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent. As Mark Zandi of Moody's Economy.com put it in recent testimony, "The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery."

But it's not doing enough ....

.... What I keep hearing from Washington is one of two arguments: either (1) the stimulus has failed, unemployment is still rising, so we shouldn't do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don't need to do any more. The truth, which is that the stimulus was too little of a good thing — that it helped, but it wasn't big enough — seems to be too complicated for an era of sound-bite politics.

But can we afford to do more? We can't afford not to ....

.... O.K., I know I'm being impractical: major economic programs can't pass Congress without the support of relatively conservative Democrats, and these Democrats have been telling reporters that they have lost their appetite for stimulus.