Paul Krugman: Premature austerity

Paul Krugman: Premature austerity

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"The boom, not the slump, is the right time for austerity at the Treasury." So declared John Maynard Keynes in 1937, even as FDR was about to prove him right by trying to balance the budget too soon, sending the U.S. economy — which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.

Unfortunately, in late 2010 and early 2011, politicians and policymakers in much of the Western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again.

In declaring Keynesian economics vindicated, I am, of course, at odds with conventional wisdom. In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can't create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump. And we also predicted the resulting political backlash.

Read more: http://www.stltoday.com/news/opinion/columns/paul-krugman/paul-krugman-premature-austerity/article_6fd65bdc-abff-5d77-a7ab-397d633579b4.html#ixzz1iW5hKhiC

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there is a boom for top 1 percent. depression for most of the rest.

what is new in US history?