The best indicator of the severity of our economic crisis is the fact that there now appears to be a broad, party-transcending consensus in favor of levels of stimulus spending that would have been treated as preposterous only a couple months ago by all but the most left-leaning economists. But in this post this morning Paul Krugman suggests that we may not be able to spend the money quickly enough “to pull the economy out of its nosedive before unemployment goes into double digits.”
The point here is that no matter how much money you’re willing to spend, you need some level of planning and preparation before you can start hiring contractors and paying people to do anything.
Now, when it comes to unemployment, ‘double-digits’ covers quite a bit of territory. To provide some perspective, unemployment topped out at just over 10% in the 1982 recession and about 25% in the Great Depression. So I’d be curious to hear from Krugman and others which end of the spectrum we’re talking about.
(ed.note: I’d add to this that Krugman’s point is a good reminder of why it’s nice to have some real economist as part of the conversation. I’ve been sort of disappointed to see the degree of emphasis on aid to states and local governments as opposed to major capital projects and green R&D in the initial round of spending. But as Krugman suggests and Atrios makes explicit, a lot of my concern in this regard is likely misguided when you take these realities into account … Ed Kilgore expands on the point about spending by state and local governments.)