Mark Thoma, at Economist’s View, posted an excerpt of article by Paul Krugman arguing that we need government spending now, we need it to hold the economy together, to support jobs and help people stay in their homes – this is not the time to worry about deficits. Accordingly, the next administration will need not to fear spending but to embrace it. – Ilene 
Let’s Get Fiscal
Time to give the economy the help it needs:
Let’s Get Fiscal, by Paul Krugman, Commentary, NY Times: The Dow is surging! No, it’s plunging! No, it’s surging! No, it’s …
Nevermind. While the manic-depressive stock market is dominating the headlines, the more important story is the grim news coming in about the real economy. It’s now clear that rescuing the banks is just the beginning: the nonfinancial economy is also in desperate need of help.
And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered…
Before I get there, let’s talk about the economic situation.
Just this week, we learned that retail sales have fallen off a cliff, and so has industrial production. Unemployment claims are at steep-recession levels, and the Philadelphia Fed’s manufacturing index is falling at the fastest pace in almost 20 years. All signs point to an economic slump that will be nasty, brutish — and long.
How … long? It could be very long indeed.
Think about what happened in the … bursting of the late-1990s technology bubble. On the surface, the policy response to that recession looks like a success story…: the Federal Reserve was able to engineer a recovery … by cutting interest rates.
But the truth is … the Fed had a hard time getting traction. Despite repeated interest rate cuts, which eventually brought the federal funds rate down to just 1 percent,… it was more than two years before the job picture started to improve. …
In other words, there’s not much Ben Bernanke can do… He can and should cut interest rates even more — but nobody expects this to do more than provide a slight economic boost.
On the other hand, there’s a lot the federal government can do…. It can provide extended benefits to the unemployed, which will both help distressed families cope and put money in the hands of people likely to spend it. It can provide emergency aid to state and local governments, so that they aren’t forced into steep spending cuts that both degrade public services and destroy jobs. It can buy up mortgages (but not at face value, as John McCain has proposed) and restructure the terms to help families stay in their homes.
And this is also a good time to engage in some serious infrastructure spending, which the country badly needs in any case. The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge…, the slump is over and the stimulus isn’t needed. Well,… the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.
Will the next administration do what’s needed to deal with the economic slump? Not if Mr. McCain pulls off an upset. What we need right now is more government spending — but when Mr. McCain was asked in one of the debates how he would deal with the economic crisis, he answered: “Well, the first thing we have to do is get spending under control.”
If Barack Obama becomes president, he won’t have the same knee-jerk opposition to spending. But he will face a chorus of inside-the-Beltway types telling him that he has to be responsible, that the big deficits the government will run next year if it does the right thing are unacceptable.
He should ignore that chorus. The responsible thing, right now, is to give the economy the help it needs. Now is not the time to worry about the deficit.
