Austerity: Krugman's False Message

Austerity is failing, crowed Paul Krugman last week in "The Chutzpah Caucus." By austerity, he means the policy of "slashing" government spending. The case is clear, he writes. Claims that spending cuts would actually boost employment by promoting confidence have fallen apart. Claims that there is some kind of red line of debt that countries dare not cross have turned out to rest on fuzzy and to some extent just plain erroneous math. Predictions of fiscal crisis keep not coming true; predictions of disaster from harsh austerity policies have proved all too accurate. Actually, most of the austerity over in Europe and here in the U.S. has featured tax increases. But we'll let that pass. Krugman then goes on to unearth the dusty remains of the 1937 recession-within-a-depression. In the United States, government spending programs designed to boost the economy are in fact rare -- F.D.R.'s New Deal and President Obama's much smaller Recovery Act are the only big examples. And neither...(Read Full Article)