I disagree with Krugman as much as humanly possible about the need/desirability of more stimulus (aka inefficient gov't spending and insane debt loads), but he makes some other well-reasoned points in this piece, IMO. http://www.nytimes.com/2009/07/03/opinion/03krugman.html?_r=1 That â30s Show By PAUL KRUGMAN Published: July 2, 2009 O.K., Thursdayâs jobs report settles it. Weâre going to need a bigger stimulus. But does the president know that? Letâs do the math. Since the recession began, the U.S. economy has lost 6 Â½ million jobs â and as that grim employment report confirmed, itâs continuing to lose jobs at a rapid pace. Once you take into account the 100,000-plus new jobs that we need each month just to keep up with a growing population, weâre about 8 Â½ million jobs in the hole. And the deeper the hole gets, the harder it will be to dig ourselves out. The job figures werenât the only bad news in Thursdayâs report, which also showed wages stalling and possibly on the verge of outright decline. Thatâs a recipe for a descent into Japanese-style deflation, which is very difficult to reverse. Lost decade, anyone? Wait â thereâs more bad news: the fiscal crisis of the states. Unlike the federal government, states are required to run balanced budgets. And faced with a sharp drop in revenue, most states are preparing savage budget cuts, many of them at the expense of the most vulnerable. Aside from directly creating a great deal of misery, these cuts will depress the economy even further. So what do we have to counter this scary prospect? We have the Obama stimulus plan, which aims to create 3 Â½ million jobs by late next year. Thatâs much better than nothing, but itâs not remotely enough. And there doesnât seem to be much else going on. Do you remember the administrationâs plan to sharply reduce the rate of foreclosures, or its plan to get the banks lending again by taking toxic assets off their balance sheets? Neither do I. All of this is depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but arenât aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level. So have we failed to learn from history, and are we, therefore, doomed to repeat it? Not necessarily â but itâs up to the president and his economic team to ensure that things are different this time. President Obama and his officials need to ramp up their efforts, starting with a plan to make the stimulus bigger. Just to be clear, Iâm well aware of how difficult it will be to get such a plan enacted. There wonât be any cooperation from Republican leaders, who have settled on a strategy of total opposition, unconstrained by facts or logic. Indeed, these leaders responded to the latest job numbers by proclaiming the failure of the Obama economic plan. Thatâs ludicrous, of course. The administration warned from the beginning that it would be several quarters before the plan had any major positive effects. But that didnât stop the chairman of the Republican Study Committee from issuing a statement demanding: âWhere are the jobs?â Itâs also not clear whether the administration will get much help from Senate âcentrists,â who partially eviscerated the original stimulus plan by demanding cuts in aid to state and local governments â aid that, as weâre now seeing, was desperately needed. Iâd like to think that some of these centrists are feeling remorse, but if they are, I havenât seen any evidence to that effect. And as an economist, Iâd add that many members of my profession are playing a distinctly unhelpful role. It has been a rude shock to see so many economists with good reputations recycling old fallacies â like the claim that any rise in government spending automatically displaces an equal amount of private spending, even when there is mass unemployment â and lending their names to grossly exaggerated claims about the evils of short-run budget deficits. (Right now the risks associated with additional debt are much less than the risks associated with failing to give the economy adequate support.) Also, as in the 1930s, the opponents of action are peddling scare stories about inflation even as deflation looms. So getting another round of stimulus will be difficult. But itâs essential. Obama administration economists understand the stakes. Indeed, just a few weeks ago, Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the âlessons of 1937â â the year that F.D.R. gave in to the deficit and inflation hawks, with disastrous consequences both for the economy and for his political agenda. What I donât know is whether the administration has faced up to the inadequacy of what it has done so far. So hereâs my message to the president: You need to get both your economic team and your political people working on additional stimulus, now. Because if you donât, youâll soon be facing your own personal 1937.