Monday, 22 November 2010

Blood Chilling Column by Paul Krugman and Hope about the Economy by Spending More

Paul Krugman, winner of the Nobel Prize in economics and notable Cassandra, has a particularly depressing column today in The New York Times. Instead of doing what might help the US economy and the world's future, the US Congress will soon make matters worse, he writes, by refusing the change the statutory debt limits without even more cuts in government budgets. Republicans will block anything that might help simply because it is proposed by the Democrats and the country is becoming ungovernable, Krugman writes:

"My sense is that most Americans still don’t understand this reality. They still imagine that when push comes to shove, our politicians will come together to do what’s necessary. But that was another country.

"It’s hard to see how this situation is resolved without a major crisis of some kind....we can only hope that the nation that emerges from that blood bath is still one we recognize"

Compare this with a front page story in last Thursday's NYT which explains that measures to encourage economic growth actually do a whole lot to cut or prevent deficits--and remember it's deficit spending that the Republicans and the Harperites in Canada are ostensibly so concerned about.

David Leonhart wrote that "the single best way to cut the deficit is to make sure that any deficit-cutting plan does not also cut economic growth... First, we shouldn’t plunge ourselves back into another economic slump by raising taxes and cutting spending too quickly. President Franklin Roosevelt made that mistake in 1937...

"In the short term, we should actually spend more. 'Some politicians and economists present a false choice: reduce unemployment or stabilize the debt,” argues a new bipartisan deficit plan that will be released Wednesday, the second such plan to come out in the last week. As Alice Rivlin, a Democrat who oversaw the writing of the plan with Pete Domenici, a Republican, put it: “We can do both. We can put money in people’s pockets in the short run and trim government spending in the long run.'"

Needless to say, we should be holding our breath about that report--and about whether other Republicans will go along with it.

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