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Friday, August 12, 2011

Paul Krugman: The Hijacked Crisis

Why are policymakers so worried about reducing the debt instead of reducing unemployment?:

The Hijacked Crisis, by Paul Krugman, Commentary, NY Times: ...For more than a year and a half ... we’ve had a public conversation that has been dominated by budget concerns, while almost ignoring unemployment. The supposedly urgent need to reduce deficits has so dominated the discourse that on Monday, in the midst of a market panic, Mr. Obama devoted most of his remarks to the deficit rather than to the clear and present danger of renewed recession.
What made this so bizarre was the fact that markets were ... saying — almost shouting — was, “We’re not worried about the deficit! We’re worried about the weak economy!” ...
So how did Washington discourse come to be dominated by the wrong issue? Hard-line Republicans have, of course, played a role... — they have found harping on deficits a useful way to attack government programs.
But our discourse wouldn’t have gone so far off-track if other influential people hadn’t been eager to ... hijack the crisis on behalf of their pre-existing agendas.
Check out the opinion page of any major newspaper, or listen to any news-discussion program, and you’re likely to encounter some self-proclaimed centrist declaring that there are no short-run fixes for our economic difficulties, that the responsible thing is to focus on long-run solutions and, in particular, on “entitlement reform” — that is, cuts in Social Security and Medicare. And... you should be aware that people like that are a major reason we’re in so much trouble.
For the fact is that right now the economy desperately needs a short-run fix. When you’re bleeding profusely from an open wound, you want a doctor who binds that wound up, not a doctor who lectures you on the importance of maintaining a healthy lifestyle as you get older. ...
What would a real response to our problems involve? First of all, it would involve more, not less, government spending for the time being — with mass unemployment and incredibly low borrowing costs, we should be rebuilding our schools, our roads, our water systems and more. It would involve aggressive moves to reduce household debt via mortgage forgiveness and refinancing. And it would involve an all-out effort by the Federal Reserve to get the economy moving, with the deliberate goal of generating higher inflation to help alleviate debt problems.
The usual suspects will, of course, denounce such ideas as irresponsible. But you know what’s really irresponsible? Hijacking the debate over a crisis to push for the same things you were advocating before the crisis, and letting the economy continue to bleed.

    Posted by on Friday, August 12, 2011 at 12:24 AM in Economics, Politics, Unemployment | Permalink  Comments (75)


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