In a recent blog post, the (indispensable) economist and columnist Paul Krugman has summarized his view of our economic predicament and what we should do to get out of it. He did this in response to a billionaire who went on TV and spoke like a simpleton. Krugman makes his case as clearly as possible, so it’s worth reading if you have any doubts at all about whether the government should be cutting or increasing spending in our present circumstances.
Henry Blodget, who isn’t an economist and was convicted of securities fraud when he was a research analyst at Merrill Lynch, argues that the argument about cutting vs. spending is over and Krugman won.
It’s clear that Krugman and his like-minded Keynesian colleagues have won the argument in the sense of having offered enough evidence to prove their thesis to reasonable people. Whether they’ve won the argument in the sense of getting politicians to change their policies isn’t clear yet. The most we can reasonably expect is that the tide has turned.
As we know, most people, especially politicians and pundits, hate to be proven wrong. Admitting that they were wrong to promote government austerity in response to the Great Recession would require a lot of character.
What I would love to see is President Obama, who is said to be a reasonable person, admit that his search for a “Grand Bargain” with the Republicans has been a terrible mistake. He should admit that we need to repeal the Sequester immediately (not just as it affects air travelers) and increase spending on infrastructure, education, research, grants to local government, etc. etc.
If it would help, Obama could have Krugman sit next to him and explain the situation in terms that even billionaires would understand! Not everyone would be convinced (there are plenty of simpletons and others with their own agendas), but it would be a step in the right direction.
Postscript 4/29/13 —
This is a sensible summary from Washington Post columnist E. J. Dionne (although it’s not really a “whodunit?” because we know who done it):