Obama’s Economic Plan Not Bold Enough for WSJ
President-elect Obama’s big economic speech today details all the problems the economy faces, and he predicts dire consequences if the government doesn’t act now – and in a big way. If nothing is done, Obama warns, the recession could linger for years. It’s all part of his effort to drum up support for his massive public works spending plan.
The plan already has critics upset over the scale of government spending it involves. Including, somewhat surprisingly, over at the Wall Street Journal’s Real Time Economics blog, they don’t think Obama is going far enough.
If economists are that nervous about things, maybe we should all be. From the blog:
The problem is not that this stimulus is too large, but rather that the entire Obama strategy now seems to be insufficiently bold.
Economists at Real Time say the Federal Reserve should adopt an aggressive, pro-inflation policy that makes wages and prices rise rather than fall; that the government should push to recapitalize banks or take them over; and that government should take a leading role in refinancing mortgages and managing foreclosures. Add all that to a stimulus plan, and it should work, they say:
The current emphasis on fiscal stimulus as the primary means of recovery is reasonable if we think that deflation is unavoidable or that any kind of moderate inflation would be an unacceptable price to pay for avoiding the Second Great Depression. The potential problem lies in failing to create the necessary conditions — positive inflation expectations, a healthy banking system, and an end to the housing bloodbath — for the fiscal stimulus to be successful.
So don’t just take Obama’s word for it today. When the WSJ economists start calling for bold action, you know things are bad.