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Krugman Says U.S. Economy Making Progress, Still Depressed

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Nov. 7 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman spoke about President Barack Obama’s second term, the U.S. fiscal cliff and quantitative easing at a press conference in Singapore.

On Obama’s challenges:

“We have the healthcare reform and we have the financial reform which needs to be put into effect. So far as he can, he needs to try and boost us out of this crisis. We’re still a depressed economy but we’re making progress.

“If it’s possible, we could use some modest additional stimulus, mostly in the form of aid to state and local governments.

“A lot of what’s required right now is just plain not doing anything stupid that derails the recovery. We can count on President Obama not to do anything stupid.

“We have a still very extreme Republican party so legislation is going to be very difficult to pass and there are going to be sharp limits on what Obama can do. To the extent that he is going to have big achievements in his second term, it’s mostly because he’s already passed the legislation.”

On the fiscal cliff:

“I think he actually proposes a reasonable solution, one that involves tax rises at the top end but not for everyone.”

On U.S. monetary policy:

“The new policy is supposed to change people’s expectations of what monetary policy will be four or five years from now. But it tries to do that with language that is indirect and guarded. So right now although it was widely taken as a signal that the Fed would be willing to hold off on pulling the trigger on interest rates, it didn’t actually say that in clear language. I think it needs to be much more explicit than what they’ve done so far.”

To contact the reporter on this story: Sharon Chen in Singapore at schen462@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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