That wouldn't be a problem except that they feel so much need to expound on it. Today, they tell readers that: "those calling for an additional stimulus package must explain why this is not enough." Wow, haven't they heard? I guess it's hard to get news in the middle of Washington. Anyhow, it works like this. (Warning, this part uses arithmetic.) The collapse of the housing bubble led to a reduction in annual rates of construction of about $450 billion. The bubble in the non-residential sector is also in the process of collapsing, cutting annual demand by approximately $200 billion. The loss of $8 trillion in housing bubble wealth, coupled with a loss of roughly the same amount of stock wealth, is leading to a reduction in annual consumption of approximately $700 billion. The total loss in demand is around $1,350 billion. The annual stimulus in the bill approved in February was around $300 billion. $300 billion in stimulus is not nearly enough to fill a $1,350 billion shortfall in demand. We'll see if the Post editorial writers can follow that one. There is one other issue that they get painfully wrong in this piece. The Post warns us that we could be borrowing too much because: "there is only so much capital to go around." Actually, this is not true right now. When you have a severe world-wide downturn, as we do now, there is no shortage of capital. If the Fed, or anyone else, just prints up tons and tons of money, it will simply generate demand for labor and resources that would otherwise be idle. At some future point when the economy is closer to its capacity, there may be issues of capital shortages, but there is none today. It is tragic that tens of millions of people around the world are sitting unemployed because of such poor thinking by those in positions of responsibility. It's too bad they can't change places.
--Dean Baker
