Paul Krugman: Stimulus Too Small, Second Package Likely (VIDEO)


Paul Krugman, the professor of economics at Princeton University and a Nobel Prize winner, spoke Tuesday to CNBC, where he discussed his views on the stimulus package.

The $787 billion stimulus is not nearly enough to fill the "well over $2 trillion hole" in the economy, Krugman said. "A fair bit of the bill is not really stimulus," he adding, noting that just about $650 billion would actually spur consumer spending and other types of stimulus.

It is "pretty likely" that the Obama administration will try and pass a second stimulus package in the next few months, Krugman said.

The economy is likely to remain depressed for at least two years, but probably much longer than that, Krugman said.

As for real estate, Krugman said that the housing bubble is still not fully deflated.

"You don't have to fill a flat tire through the hole," Krugman noted. He said home prices would likely drop another 10% to 15% before they bottom out.

As for unemployment, Krugman is predicting it will peak around 9% sometime later this year. There is a chance unemployment could reach the double digits, however, if the crisis continues to spread rapidly across the globe.


Before You Go

Popular in the Community