Tags: shiller | stimulus

Shiller: Second Stimulus Needed to Avoid Double Dip

By    |   Wednesday, 05 Aug 2009 01:34 PM

Unemployment in the United States will continue to be a obstacle to economic recovery and a second government stimulus package will be needed to get the economy going again, says Yale economist and housing guru Robert Shiller.

Stress tests held at banks receiving government aid assumed unemployment at under 9 percent, a figure that is far from actual joblessness rates, already at 9.7 percent and well into the double digits if one counts folks who have given up looking.

“The first stimulus wasn't strong enough and it was slow in coming out," Shiller told Bloomberg News.

"We're still in an iffy situation."

The Obama administration's $787 billion stimulus program has sparked a debate nonetheless. Supporters insist it will eventually create jobs, while critics argue that it has added to the country's deficit without improving the economy.

Vice President Joe Biden said that government stimulus-related programs such as the cash for clunkers car trade-in deals are helping the economy to heal even though full recovery is a long way away.

“Our critics say they don't think this program is helping,” Biden said.

“It is helping. I think it would be hard to tell the young family who just bought their first home because of the tax credit or the thousands of people who just traded in gas-guzzlers for more efficient cars that this is having no impact.”

Many private economists remain pessimistic about the recovery, notes David Altig, research director at the Atlanta Federal Reserve Bank, in a blog on the bank’s Web site.

In prior recessions, the rule was: the harder the fall, the stronger the rise. For example, the 1957-58 recession had the sharpest GDP contraction — more than 3.5 percent — but it also had the strongest rebound, about 9.5 percent.

This time around, the average forecast of the 50 Blue Chip economists calls for a contraction of more than 3.5 percent but a rebound of only about 2 percent.

“Either we are about to continue making history — and not in a good way — or current guesses about the medium-term economy are way too pessimistic,” Altig writes.

Nouriel Roubini is one such pessimist.

Bad news could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note last week.

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Unemployment in the United States will continue to be a obstacle to economic recovery and a second government stimulus package will be needed to get the economy going again, says Yale economist and housing guru Robert Shiller.Stress tests held at banks receiving government...
shiller,stimulus
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2009-34-05
Wednesday, 05 Aug 2009 01:34 PM
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