Has government spending failed in the crisis? We should have tried.

After giving quite some space to Greg Mankiw recently, I’d like to share an article by NYTimes Op-Ed columnist (and economist) Paul Krugman with you. He can be considered a member of the opposing (i.e. liberal, democrats-leaning) camp to Mankiw. In the column, he argues convincingly (and surprisingly) that the big rise in government spending that failed to really boost the US economy did so because it never really happened:

And government purchases of goods and services have gone up. But adjusted for inflation, they rose only 3 percent over the last two years — a pace slower than that of the previous two years, and slower than the economy’s normal rate of growth.

In his opinion, the stimulus bill was too small, and mostly eaten up by filling gaps in state and local government finances. And so, the idea of increasing government spending in a crisis is publicly discredited and rejected without having really been tried out.

The only good news, then, is that the Tea Party movement will most probably hurt the Republicans in the upcoming midterms.

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Datum: Freitag, 15. Oktober 2010 23:04
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2 Kommentare

  1. 1

    Christoph, Du wirst doch noch ein echter Ökonom :)!

  2. 2

    Dankeschön! :D