Nov. 2 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman said the U.S. must increase stimulus spending or risk “many years of high unemployment” and possibly waiting a decade for full employment to return.

“The stimulus was too little of a good thing,” Krugman wrote in an article published in the New York Times today. “It helped, but it wasn’t big enough.’

The world’s largest economy expanded at a 3.5 percent pace from July through September, figures showed last week, helped by federal assistance to the housing and auto industries. President Barack Obama, called the report a “good sign” and said an expanding economy is the first step to job creation.

Krugman said that even if the economy continued growing at a 3.5 percent rate unemployment would “eventually start falling - but very, very slowly.” Fellow Nobel laureate Joseph E. Stiglitz said on Oct. 31 that the U.S. recession is “nowhere near” an end and the third-quarter growth rate won’t carry into 2010.

The U.S. unemployment rate reached a 26-year high of 9.8 percent in September and Federal Reserve Chairman Ben S. Bernanke said last month the rate may remain above 9 percent through 2010. High unemployment and a depressed economy have prompted businesses to cut investment on plants and equipment as well as spending on product development and worker training, Krugman said.

‘Much More’

“At current growth rates, we’d be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment,” Krugman said. “The government needs to do much more. Unfortunately, the political prospects for further action aren’t good.”

Obama’s administration reported on Oct. 30 that the $787 billion stimulus passed in February is directly responsible for saving or creating about 640,329 jobs so far. A record $1.4 trillion budget deficit limits the president’s options.

“But can we afford to do more? We can’t afford not to,” Krugman said. “High unemployment doesn’t just punish the economy today; it punishes the future, too.”

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

Last Updated: November 2, 2009 07:29 EST