Yesterday, during an event entitled Progressives Have a Mandate — Now What?, Center for American Progress Action Fund Senior Fellow Gene Sperling weighed in on the need for Congress to enact an economic stimulus package. Sperling explained that the government should take “a Powell Doctrine approach to economic stimulus for 2009,” using “overwhelming fiscal stimulus force” to get the economy back on track. Watch it:
Sperling added that “the minimum amount that is needed is $300 billion…with the understanding that we may need more.”
In advocating such a large stimulus, Sperling is in agreement with a host of economists. Last month, New York University Professor Nouriel Roubini said that $400 to $500 billion may be necessary, while Nobel Laureate Paul Krugman has suggested $600 billion.
These proposals all dwarf the $60-$100 billion package endorsed by Rep. Nancy Pelosi (D-CA). However, Pelosi (and the rest of Congress) needs to be aware that turning the economy around — even if it means increasing the deficit in the short term — is preferable to holding back and enacting a smaller package that does not provide an adequate economic boost.
As the Center for American Progress laid out in its recovery strategy “for 2009 and beyond”:
These investments in economic stimulus and recovery will contribute to a higher budget deficit in the short term. But we cannot be penny wise and pound foolish. Strong economic growth will do far more to put us on the path of fiscal health than shortchanging needed investments today.
“Remember, if the stimulus is too big, it does much less harm than if it’s too small,” wrote Krugman. “You really, really don’t want to lowball this.”
At the same time, though, it’s important to “restore financial discipline and the public’s confidence in government” by making “a serious commitment to scrub the budget of inefficient and ineffective programs and tax incentives.” This combination of short-term stimulus and long-term discipline will help to create a “sustained economic agenda that focuses on building the foundation for a brighter future.”