Paul Krugman: The Pain Caucus

[LongTomH]

Prof. Krugman's op-ed at the NY Times: The Pain Caucus. Krugman complains about the OECD's calls for economic austerity, even in a weak recovery:

What’s the greatest threat to our still-fragile economic recovery? Dangers abound, of course. But what I currently find most ominous is the spread of a destructive idea: the view that now, less than a year into a weak recovery from the worst slump since World War II, is the time for policy makers to stop helping the jobless and start inflicting pain.

When the financial crisis first struck, most of the world’s policy makers responded appropriately, cutting interest rates and allowing deficits to rise. And by doing the right thing, by applying the lessons learned from the 1930s, they managed to limit the damage: It was terrible, but it wasn’t a second Great Depression.

Now, however, demands that governments switch from supporting their economies to punishing them have been proliferating in op-eds, speeches and reports from international organizations. Indeed, the idea that what depressed economies really need is even more suffering seems to be the new conventional wisdom, which John Kenneth Galbraith famously defined as “the ideas which are esteemed at any time for their acceptability.”

<snip>

The best summary I’ve seen of all this comes from Martin Wolf of The Financial Times, who describes the new conventional wisdom as being that “giving the markets what we think they may want in future — even though they show little sign of insisting on it now — should be the ruling idea in policy.”

Put that way, it sounds crazy. And it is. Yet it’s a view that’s spreading. And it’s already having ugly consequences. Last week conservative members of the House, invoking the new deficit fears, scaled back a bill extending aid to the long-term unemployed — and the Senate left town without acting on even the inadequate measures that remained. As a result, many American families are about to lose unemployment benefits, health insurance, or both — and as these families are forced to slash spending, they will endanger the jobs of many more.

Edited to add: I got the link from a friend on my email list. Thanks Jackie!

Read the rest here: http://www.nytimes.com/2010/05/31/opinion/31krugman.html?src=me&ref=general

[Admiral Loinpresser]

1. How come we can afford two wars?

Wars, incidentally, which do nothing to enhance our national security. No we shouldn't!

[Warpy]

2. Butbutbutbut war stopped the Great Depression!

Didn't you get the conservatives' memo?

The truth is that they're following Hoover's lead on austerity for the many while jawboning corporations to rehire them when there is no longer any market at all for goods and services. They're about to find out that corporations still aren't bothering to listen to them.

I guess this country will have to learn the hard way--again--that no idea a conservative ever comes up with will ever work.

Be good to each other, folks, because in the short term, we're all we have.