Tags: Sachs | Krugman | fiscal | austerity

Columbia Economist Sachs: Krugman Has it All Wrong on Fiscal Austerity

By    |   Tuesday, 06 January 2015 08:27 AM

During the last few years, Nobel laureate economist Paul Krugman, writing in his New York Times column, has railed against budget-deficit reduction, saying it's ill-advised given the fragile state of the economic recovery.

But the fiscal austerity agreed upon by the White House and Congress starting in mid-2011 has worked out pretty well, Columbia University economist Jeffrey Sachs writes in an article for Project Syndicate.

The budget deficit has dropped to an estimated 2.9 percent of GDP for all of 2014 from 8.4 percent in 2011, he notes.

"Yet, rather than a new recession, or an ongoing depression, the U.S. unemployment rate has fallen from 8.6 percent in November 2011 to 5.8 percent in November 2014," Sachs writes.

"Real economic growth in 2011 stood at 1.6 percent, and the IMF expects it to be 2.2 percent for 2014 as a whole." Growth averaged 4.8 percent in the second and third quarters, and GDP could expand more than 3 percent this year, he professes.

"So much for Krugman's predictions," Sachs states.

"Krugman is a great economic theorist — and a great polemicist. But he should replace his polemical hat with his analytical one and reflect more deeply on recent experience: deficit cutting accompanied by recovery, job creation, and lower unemployment."

Meanwhile, Alan Greenspan offered a mixed assessment of the U.S. economy last week, and Robert Wiedemer, co-author of "Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown," tells Newsmax TV that the former Fed chairman got it just about right.

Greenspan told Bloomberg, "The United States is doing better than anybody else, but we're still not doing all that well. We still have a very sluggish economy."

Wiedemer's reaction: "I agree that we are probably the best in the world, but it's definitely sluggish," he tells Newsmax TV's "America's Forum" show.

"We're really not getting that kind of investment we got earlier, we're getting a massive amount of buy back of stock, a massive amount of investment in pumping up asset bubbles," Wiedemer, managing director at MacroView Investment Management and a Moneynews Insider, explains.

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During the last few years, Nobel laureate economist Paul Krugman, writing in his New York Times column, has railed against budget-deficit reduction, saying it's ill-advised given the fragile state of the economic recovery.
Sachs, Krugman, fiscal, austerity
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2015-27-06
Tuesday, 06 January 2015 08:27 AM
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