Keynesian Economics in 2009

The most recent Nobel laureate in Economics, Paul Krugman, spoke at the National Press Club last Friday. The Dow Jones Newswire covered his Keynesian message:

Despite the Fed's recent slashing of interest rates, more action is needed from the government, he said.

"They have achieved something with the policies ... but it is clearly not enough," Krugman said.

Infrastructure spending is "clearly the best thing" to do right now, but timing is key, he said.

"We are bleeding jobs," Krugman said. "The immediate problem is: 'How do we get enough stuff going to stop this economy's nosedive?' "

A stimulus package of $850 billion -- a price tag that the incoming Obama administration is reportedly considering -- is inadequate, he said. Krugman cited estimates of roughly $150 billion of infrastructure programs that are "shovel ready," projects that can be operational within six months.

It's not a direct quote, but journalist Ruth Mantell writes that Krugman says "massive government spending is necessary to stop the ongoing hemorrhage of jobs and shore up the economy."

Apparently, the old quote attributed to FDR New Dealer Harry Hopkins is not authentic: "tax and tax, spend and spend, elect and elect."

However, that doesn't mean Barack Obama and others in Washington won't be trying to use this playbook in 2009. Is $1 Trillion too much government spending given the current economy? Is it enough? We're likely to find out.


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