SAN FRANCISCO (Reuters) - The current U.S. downturn could easily drag on for the rest of this year, renowned economist Martin Feldstein said on Sunday.
“The current downturn is likely to last much longer than previous downturns. ... We will be lucky to see the recession end in 2009,” Feldstein, former president of the National Bureau of Economic Research, said at the American Economics Association annual meeting in San Francisco.
The NBER said last month that the U.S. economy had entered recession in December 2007.
Feldstein, an economics professor at Harvard University, called for fiscal stimulus that is “big, quick and targeted at increasing aggregate activity.”
Levels of $300 billion to $400 billion “seem like good targets” for both 2009 and 2010, he said.
Some of the areas that could be targeted for more spending include the military, the FBI, and funding for research through increased grants to universities and hospitals, Feldstein said.
“In each area, the government budget must go beyond business as usual,” he said.
He warned that even those efforts might fall short, leaving unemployment levels high two or three years from now and necessitating more drastic measures.
Editing by Leslie Adler