Nobel-laureate economist Paul Krugman blasted the Senate for trimming President Obama’s stimulus package, which was too small to begin with, he maintains.
Senate leaders agreed over the weekend to cut the stimulus program to about $780 billion, although a later version grew to $838 billion. The senators “are going in the wrong direction,” Krugman said in a panel discussion.
The package needs to rise as high as $1.4 trillion to make up for the plunge in spending by consumers and businesses, he says.
“We should be looking at $1.3 to $1.4 trillion to close the gap, even if we have a perfectly designed package,” Krugman says.
“We are facing a shortfall of about $2.5 trillion dollars. The package will mitigate the gap. It is an amelioration, not a solution.”
Krugman lashed out at critics who say the stimulus program should rely more on tax cuts and less on spending.
“The clear and present danger is not enough spending,” he maintains.
“You get more bang for your buck from spending than from tax cuts. There is no coherent economic theory under which more tax cuts would be a good thing.”
Not everyone shares Krugman’s views. Investment guru Marc Faber says we would better off with a tax reduction and less government spending.
“The best the government can do is a massive tax cut. At least that goes into the private sector,” he told Bloomberg.
“If the government spends that kind of money in stimulus [$900 billion], it will have dire consequences,” Faber says.
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