09 March 2009

Behind the curve. Is the UK as well?

There is an intriguing article by Paul Krugman in the New York Times asking if Obama’s policies are already behind the curve:

….many economists, myself included, actually argued that the plan was too small and too cautious. The latest data confirm those worries — and suggest that the Obama administration’s economic policies are already falling behind the curve.

The administration’s budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February — and it’s rising fast.

He then goes on to say that the policies already announced will do little to stem the huge rise in unemployment.

What Obama had to say:

Our belief and expectation is that we will get all the pillars in place for recovery this year.

Krugman comments:

— a belief and expectation that isn’t backed by any data or model I’m aware of.  To be sure, leaders are supposed to sound calm and in control. But in the face of the dismal data, this remark sounded out of touch.

this dismissal — together with the continuing failure to announce any broad plans for bank restructuring — means that the White House has decided to muddle through on the financial front, relying on economic recovery to rescue the banks rather than the other way around. And with the stimulus plan too small to deliver an economic recovery.

Then he concludes:

So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.

….that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up.

The whole article is worth a read.  What struck home are the similarities with the UK, in that Brown has not done enough.  That being the case, then Moses has run out of time to turn the economy round before he has to face the electorate.

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