Paul Krugman continues to tilt at windmills:
Op-Ed Columnist – Myths of Austerity – NYTimes.com.
Which brings me to the subject of today’s column. For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.
This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.
I’m no New York Times columnist with a PhD in economics and a recent Nobel Prize, but I did do a significant amount of undergrad course work in economics. I think I understand most of the basics in macroeconomics. If you reduce federal spending in the midst of severe downturn, you make it worse.
It really is pretty simple. There are no private sector dollars out there waiting to replace those federal dollars and consumers are not optimistically spending what they have either. This leads me to believe that policy makers have some other agenda. If it’s not restoring healthy economic growth and full employment, then who are they carrying water for?
