Stimulus shortfall - back of the envelope

I'm still worried the Obama stimulus won't be big enough. Today's NYT had Harry Reid saying economists had told him we need to look at $800 billion to $1.2 trillion over two years, but that Obama's team is so far talking about $775 billion as a two year max. Apparently GDP declined at 5% annualized rate in the fourth quarter. If we therefore need at least 5% of GDP government stimulus to keep things from tanking, in a $14 trillion economy that's $700 billion per year. And who knows if GDP will be contracting at a deeper rate as early '09 figures come in? My business friends and colleagus think the first quarter could be a holocaust. We need more radical stimulus numbers fast from credible sources that make any Obama call for $700-plus billion a year the "sane, reasonable alternative." Over to you, Paul Krugman....


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