Tags: paul | krugman | 1930s

Krugman: It's Feeling Just Like the 1930s All Over Again

Tuesday, 22 Jun 2010 03:51 PM

The political and economic climates are taking on a decidedly 1930s feel, says Nobel Prize winning economist Paul Krugman.

“Suddenly, creating jobs is out, inflicting pain is in,” Krugman writes in The New York Times.

“Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.”

Krugman and some other economists say this raises the specter of the 1930s — 1937 to be precise, when President Franklin Roosevelt’s attempts to balance the budget drove the economy back into recession.

“Many economists, myself included, regard this turn to austerity as a huge mistake,” Krugman says.

And nowhere is this mistake more evident than in Germany, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

“Press German officials to explain why they need to impose austerity on a depressed economy, and you get rationales that don’t add up,” Krugman observes. “Point this out, and they come up with different rationales, which also don’t add up.”

Meanwhile, a trans-Atlantic rift is growing over the right medicine for Europe's financial crisis, with Britain announcing its steepest cuts in decades and Germany defending its own austerity measures after a warning by President Barack Obama that budget-slashing could threaten the global recovery, the Associated Press reported.

Britain's emergency budget is the latest in a string of deep cuts in public spending and reflects new resolve in Europe, after Greece was pushed to the brink of bankruptcy and even threatened the bloc's economic union, to tackle debt before worrying about growth.

As leaders of the Group of 20 economic powers prepare to assemble later this week in Canada, that single-minded focus is worrying the United States. Obama wrote a letter to world leaders Friday warning against excessive spending cuts.

German Chancellor Angela Merkel fought back this week, defending her government's $80 billion savings plan as British treasury chief George Osborne forged ahead with his own grim budget.

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The political and economic climates are taking on a decidedly 1930s feel, says Nobel Prize winning economist Paul Krugman. Suddenly, creating jobs is out, inflicting pain is in, Krugman writes in The New York Times. Condemning deficits and refusing to help a...
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2010-51-22
Tuesday, 22 Jun 2010 03:51 PM
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