When Austerity Fails
By PAUL KRUGMAN
NYT
I often complain, with reason, about the state of economic discussion in the United States. And the irresponsibility of certain politicians — like those Republicans claiming that defaulting on U.S. debt would be no big deal — is scary.
But at least in America members of the pain caucus, those who claim that raising interest rates and slashing government spending in the face of mass unemployment will somehow make things better instead of worse, get some pushback from the Federal Reserve and the Obama administration.
In Europe, by contrast, the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer to all problems. Underlying this insistence have been economic fantasies, in particular belief in the confidence fairy — that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence.
Unfortunately, the confidence fairy keeps refusing to make an appearance. And a dispute over how to handle inconvenient reality threatens to make Europe the flashpoint of a new financial crisis.
(More here.)
NYT
I often complain, with reason, about the state of economic discussion in the United States. And the irresponsibility of certain politicians — like those Republicans claiming that defaulting on U.S. debt would be no big deal — is scary.
But at least in America members of the pain caucus, those who claim that raising interest rates and slashing government spending in the face of mass unemployment will somehow make things better instead of worse, get some pushback from the Federal Reserve and the Obama administration.
In Europe, by contrast, the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer to all problems. Underlying this insistence have been economic fantasies, in particular belief in the confidence fairy — that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence.
Unfortunately, the confidence fairy keeps refusing to make an appearance. And a dispute over how to handle inconvenient reality threatens to make Europe the flashpoint of a new financial crisis.
(More here.)
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2 Comments:
Is Krugman suggesting that insisting that "un-sound" money and "un-balanced" budgets are the answer? Lordf save us.
Oh, come on, Tom. The answer was, is and always will be 'tax the rich'.
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