Today Nobel Prize-winning economist Paul Krugman, told participants at a global financial conference that “The United States may emerge from recession in a technical sense as early as this summer, though a likely worsening in labor conditions means a “depressed economy” could last as long as five more years.” According to him, while the US recession may end this year, “Deteriorating labor markets, however, were likely to continue on into 2011, meaning the period of a depressed economy could last until 2013 or 2014.”

Along the similar lines, some economists have questioned the adequacy of the rescue packages announced by the US government since last year. The following chart shows the comparison of gross costs of fiscal rescue packages in 2008 (click to expand):

Source: FINANCIAL CRISES: PAST LESSONS AND POLICY IMPLICATIONS
ECONOMICS DEPARTMENT WORKING PAPERS No. 668
By Davide Furceri and Annabelle Mourougane via OECD

We can see from the above table that the gross cost amounts to just 5.1% of GDP. On a net basis, this is only 4.0% of GDP. When compared to other countries this is low. For example, counties like the UK, Germany,Austria have announced packages equivalent to more than 19%, 28% and 36% of GDP. Ireland is an exception where the cost is over 235% of GDP. However countries like Canada Italy, Portugal and Denmark have implemented rescue packages whose fiscal costs amount to just single digit percentage of GDP.

While the cost of US rescue packages is small (4% of GDP), the cost of inaction would be  greater.