« 'The Effect of Oil Price Declines on Consumer Prices' | Main | 'On Mark Thoma: Marginalism, Marx etc' »

Wednesday, November 19, 2014

'Fiscal Responsibility Claims Another Victim'

Paul Krugman:

Fiscal Responsibility Claims Another Victim: A few more thoughts on Japan.
The bad growth news shows, pretty clearly, that the consumption tax hike was a big mistake. It also shows, by the way, how weak the market monetarist argument — which is that fiscal policy doesn’t matter, because central banks can always achieve the nominal GDP they want — really is; do you seriously want to contend that Kuroda likes what he sees, that he isn’t trying as hard as he can to boost Japan out of deflation?
Beyond that, the Japanese story is another example of the damage wrought by the rhetoric of fiscal responsibility in a depressed economy.
Leave on one side the expansionary austerity nonsense. Even among relatively sensible people, you often encounter calls for a strategy that couples loose fiscal policy, maybe even stimulus, in the short run with measures to address long-run sustainability. ... But ... the urgency of the stimulus part gets lost, and in fact the practical result is generally austerity even in depression.
So it was with Japan... — the country that has offered many useful lessons to the West, none of which our policymakers have been willing to learn.

    Posted by on Wednesday, November 19, 2014 at 11:43 AM in Economics, Fiscal Policy | Permalink  Comments (13)


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.