Friday, October 31, 2008

Consumer spending won't do it. We need (gasp!) the government

Article by Paul Krugman in today's Times in which he explains the paradox of thrift (lower consumer spending, while overdue and in some ways admirable, affects the economy negatively, especially given the liquidity crisis we're seeing now) and recommends a Keynesian solution:
...what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.
I sure as heck wouldn't. This column also speaks to something I wrote about more on my other blog - sudden rediscovery in the mainstream press of economic theories other than Friedmanist, Greenspanist libertarianism. (Well, Krugman has been beating this drum, but he's been one of the few.) Greenspan's belated recognition that his theories were not related to reality was a pleasure, albeit a bitter one. The long, dark Reaganist night is finally ending. Dawn is breaking, people.

(Hat tip: Daily Kos)

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