Paul Krugman's "Depression Economics Returns "

In the Times this morning, Paul Krugman makes some suggestions for the new Obama administration:

What does all this say about economic policy in the near future? The Obama administration will almost certainly take office in the face of an economy looking even worse than it does now. Indeed, Goldman Sachs predicts that the unemployment rate, currently at 6.5 percent, will reach 8.5 percent by the end of next year.

All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

So the question becomes, will the Obama people dare to propose something on that scale? Let’s hope that the answer to that question is yes, that the new administration will indeed be that daring. For we’re now in a situation where it would be very dangerous to give in to conventional notions of prudence.

Well, let me start by saying that I trust Krugman with the economy maybe more than anyone in the world. He is after all a Nobel Prize winner in economics and predicted the downfall of this economy several years ago, while many economists were still saying nothing was wrong with the economy. So when Krugman says we need to inject even more money into the economy, I believe him.

What I am worried about is the Obama administration. After injecting $700 billion into the economy already, it would definitely be politically unpopular to inject another $600 billion into it. Will Obama and his team do what's politically unpopular yet good for the nation? Will they stand by what they think is right? I hope so. Either way it's going to be Mr. Obama's first big test as president.