New York Times columnist Paul Krugman recently opened an online forum for readers to submit questions on the economy. The website was so overwhelmed with inquiries, the Times had to shut the forum down in less than 24 hours.
While questions and answers are still available, here are just a few:
Q: What does a recovered U.S. economy
look like? Obviously many of the activities we did in the past such as home
construction and real-estate related businesses and all sorts of things based
on credit driven consumer spending will no longer work. Related to this,
shouldn’t stimulus money be used to build a different sort of economy? –Jeremy
Hickeson
A: The recovered economy will surely involve more manufacturing – in fact, before the world economy collapsed we were seeing a boom in manufactured exports, with shortages of machinists and other skilled workers. It will probably include a lot of green employment in the broad sense – not just people building and running wind farms, but people busily improving insulation and installing white roofs.
As for the stimulus: a lot of what we should be doing isn’t so much building the future as avoiding collateral damage from the crisis. We should be giving much more aid to state and local governments, so that education and basic services aren’t crippled by the slump. We should be investing in basic infrastructure, which we need regardless of the shape of the economy. It’s not clear that the stimulus has to be very much influenced by likely change in direction – although trying to prop up the housing industry is a mistake.
Q: One of the arguments I hear most
frequently against fiscal stimulus is that we’re taking money from future generations.
While I understand the benefits that such a stimulus can provide now, how is it
beneficial in the long term? –Chris B.
A: First of all: in the immortal words of John Maynard Keynes,
in the long run we are all dead. Beyond that, however: the recession is causing
low business investment, which means lower capacity in the future; it’s causing
young people to postpone or cancel education; it’s pushing people out of the
work force, eroding their skills; it’s raising child poverty, with devastating
consequences for personal development. Stimulus, by mitigating the slump, helps
limit all these long-term costs.
Q: If you were in the Obama administration
(and why aren’t you…but that is a different question) and were given the power
to do what you think is needed to rescue the economy, what exactly would you do
first? –Pat McDowell
A: Right now: more job creation efforts! It’s OK if we don’t call it a stimulus, and it’s OK if we don’t put it all in one bill, but at this point we’re looking at an output gap – the difference between what the economy should be producing and what it will actually produce – of between $2 trillion and $3 trillion over the next year and a half, while the remaining stimulus in the pipeline is probably less than $400 billion. We have to do much more.
For more questions and answers, visit Krugman’s blog here.
