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Title: The Strange Death of Fiscal Policy
Source:
NY Times
URL Source: http://krugman.blogs.nytimes.com/20 ... trange-death-of-fiscal-policy/
Published: Nov 3, 2010
Author: Paul Krugman
Post Date: 2010-11-03 21:41:14 by go65
Keywords: None
Views: 1916
Comments: 8
One clear result of the midterms is that we won’t have anything like a further round of stimulus. And this, in turn, means that the narrative all the Very Serious People will tell is that fiscal policy was tried, it failed, and that’s that. But the real facts don’t at all support the conventional wisdom. Actually, let me focus on an international comparison. You often hear the US experience contrasted with Germany: America, we’re told, went for Keynesian policies, while Germany chose austerity, and Germany did better. But as far as GDP is concerned, Germany did not, in fact, do better: Yes, Germany did better on employment — but this reflects policies that American conservatives surely don’t support, including employment subsidies, strong unions, and rules making it difficult to fire workers. And what may be even more surprising: if we look at actual government purchases of goods and services, as opposed to transfer payments (many of them just payments from the federal government to states), Germany was more Keynesian than the United States: So, it’s an amazing thing: Obama and company have managed to convince people that big government failed, without actually delivering big government. Update: Just to be clear, I’m not saying that the Germans were big Keynesians; the point is that neither of us were.
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#4. To: go65 (#0)
We must be aware of the loss of political legitimacy which we are seeing right now in the U.S. elections. In some communities that are crumbling economically, there is little interest in politics at all. In fact, politics is perceived as a one-way street in which the government extracts tax revenues, and the community gets almost nothing in return. At that point, government becomes completely predatory. Right now the government is completely between a rock and a hard place because in the worsening foreclosure debacle, if the government tells the people that it will not reinforce fraudulent mortgages against them, then the banks collapse, and the people are not happy about that. On the other hand, if the government comes down on the side of the banks, which they are more likely to do, and tells the people that fraudulent mortgages are going to be enforced against them, people are going to be furious. This has the potential to absolutely explode in the administration's face. There are no solutions to this.
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Top • Page Up • Full Thread • Page Down • Bottom/LatestUpdate: Just to be clear, I’m not saying that the Germans were big Keynesians; the point is that neither of us were.
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