By Ruth Mantell
Conventional monetary policy is at its limits, and massive government spending is necessary to stop the ongoing hemorrhage of jobs and shore up the economy, Nobel Prize-winning economist Paul Krugman said Friday at a National Press Club luncheon.
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?'"
It is likely that 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.
In addition to the economy, Krugman discussed the automotive sector. He argued that a $13.4 billion auto bailout package approved Friday for Chrysler and General Motors Corp. (GM) was necessary because it would allow the government and companies the time, at least until February, to work out a more thoughtful solution. An additional $4 billion for General Motors would require congressional approval as part of the additional $350 billion in funds.
"You can't organize an orderly bankruptcy in this environment," Krugman said. "This will kick the can down the road so the next administration and Congress can find a solution," Krugman said. "A bankruptcy now would be a massive anti-stimulus program you don't want to happen."
-Ruth Mantell; 415-439-6400; AskNewswires@dowjones.com
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Publié le 19 Décembre 2008 Copyright © 2008 Dowjones