depression?

The news from the Department of Commerce was much worse than expected - US economy shrank 6.2% (annualized) over the last three months of 2008. The New York Times aired out the word "depression" in reporting it. Too early to say but you can't discount it - in any case, this looks like it will be much worse than the 1982-83 recession.

A number earlier this week was even more shocking: 45.7%. That was how much Japan's exports in January 2009 shrank compared to January 2008. Japan's exports to the US were down 52%, and overall car exports down 66%. Those are almost incomprehensible numbers. And they are a reflection of the weakness of the US economy more than that of the Japanese economy.

Will this threaten the assumptions the Obama Administration has made in its budget? Of course. Does that mean Obama should reduce spending requests. Not at all. If anything it further underscores the need for government spending. Ain't nobody else spending. Now is the right time for the government to invest on things like infrastructure, health care, and creating alternatives to carbon-intensive energy sources. The government's spending will keep some people in jobs and some companies in business, and sure as heck won't crowd out any private investment for a while...