Dean Baker, whose earlier excellent post provides a compelling argument for a bridge loan to the auto industry, reminds us (via TPM) that the economy needs much more to keep a likely deep recession from becoming another depression.
Baker’s plea joins those we’ve seen from Paul Krugman and Nouriel Roubini (video at right — h/t Stoller) as well as 375 other economists signing a letter organized by the Center for Economic Policy Research. From Dean Baker:
We know how to keep the economy from collapsing. We didn’t have this information 80 years ago. The secret is to spend money, lots of it.
CEPR just circulated a letter that garnered 375 economists’ signatures arguing for a stimulus between $300 billion and $450 billion. This might be too small given all the bad news that we are seeing. We may need to spend $500 billion or $600 billion a year to get the economy back on its feet, possibly more. The key point is that we can get the economy back on its feet; we just have to spend the money to do it.
So where are Congress and the Administration? Despite the growing economist consensus on what needs to be done, Thursday Congress was able only to pass a narrow bill extending unemployment benefits a few more weeks. The President says he’ll sign the bill.
That’s good, but this effort, while undoubtedly worthwhile, is trivial compared to what the country needs. From today’s must-read Krugman:
But nothing is happening on the policy front that is remotely commensurate with the scale of the economic crisis. And it’s scary to think how much more can go wrong before Inauguration Day.
But Government is as frozen as the credit markets, primarily because an obstructionist Republican Party, already at its worst disapproval levels in decades, is still clinging to the delusion that they can resurrect themselves by restricting government spending and risking a depression.
Update: More from Dean Baker here.