A Stimulatin' Development

The Kroog wants another stimulus package.

The United States risks a Japan-style lost decade of growth if it does not take aggressive action to stimulate its economy and clean up its banking system, Nobel Prize-winning economist Paul Krugman said on Monday.

"We're doing half-measures that help the economy limp along without fully recovering, and we're having measures that help the banks survive without really thriving," Krugman said.

"We're doing what the Japanese did in the nineties," he told a small group of reporters during a visit to Beijing.

He said it was not clear that China would suffer sub-par growth as a consequence of the fallout of the present crisis.

"I'm mostly worried that the U.S. and the euro zone will have Japanese-type lost decades," he said.

Krugman said he expected little or no employment growth this year or next in the United States, where the jobless rate in April hit a 25-year high of 8.9 percent.

"A second stimulus is becoming clearly urgent. They need a very, very strong stimulus," said Krugman, a Princeton University professor and a New York Times columnist.

Cleaning up the bank system is more important, I think. Even more important is dropping hardcore Plan N on the insolvent ones. But of course, politically neither will be possible until 2010.

And by then it will be far too late. When the euphoria of this Dead Cat Bounce wears off and the silly talk of a V-shaped recovery and 6% positive GDP growth in 2009 is put to rest, the reality that remains will not be pretty.

Obama will not be able to blame Bush for much longer. He will be able to blame the Party of No somewhat. But in the end, it'll be the ConservaDems that kill the economy.