China’s Stimulus In Perspective: Comparable U.S. Package Would Be $2.4 Trillion

beijingclosing.jpgOver the weekend China unveiled a “massive” $568 billion stimulus plan to “loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.”

The announcement sent markets around the world soaring as it eased fears of a huge dropoff in Chinese demand.

This emergency spending by the Chinese government will invest “the equivalent of almost a fifth of its gross domestic product last year on infrastructure.” The $568 billion is approximately 18% of China’s $3.3 trillion 2007 GDP.

An equivalent investment by the United States government in infrastructure and emergency spending would cost over $2.4 trillion, or 18% of the United States’ $13.8 trillion 2007 GDP.

This is 15 times the size of Speaker Pelosi’s proposed two-part $160 billion stimulus, and 12 times the size of Center for American Progress’ “Green Recovery” proposal that would invest $200 billion in green infrastructure and alternative energy priorities over two years.

In a column today, Nobel Prize winning economist Paul Krugman points out that much of the failure of FDR’s New Deal stimulus was that it was not large enough.

He writes, “My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.”