The coming Third Depression: Those aren’t deficit hawks circling up there, those are buzzards.
Paul Krugman writes this morning about a third Great Depression and the futility of…:
…orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times. And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
The stimulus of 2009 was too small. The overall bill was slashed and then larded — as a sop to Republicans — with the largest tax cut in history (which Republicans then voted against!). The result was a stimulus that was about one-third of what it needed to be. The result? Our economy was pulled back from the brink but unemployment remains way, way too high. And now we’re beginning to teeter back into the abyss.
But further stimulus is almost impossible because the pendulum is swinging the other way and deficit-cutting is the main focus. Those aren’t aren’t deficit hawks circling up there, my friend: those are buzzards.
Fact is, if cutting taxes on the rich is the way to create jobs, where were the jobs that should have resulted after the massive (unfunded) tax cuts of the last ten years? Job creation was non-existent. And you can’t credibly argue that $1 trillion-with-a-T in tax cuts weren’t enough.
Keep an eye on Europe. The movement toward severe austerity budgets — ratified by the G20 this past weekend — will probably not raise the confidence of the markets. It’s as if the markets know that the best, quickest way to drive the economy forward is to bring down the unemployment rate — how ever you can do it.
And since corporations are unable — or unwilling — to do it, then government has to provide the stimulus.
What do you think?
