Tuesday, July 6, 2010

Austerity vs. Stimulus: Another Round

Well, a great weekend for economic debate:

  1. In an almost head-to-head matchup, both Paul Krugman and Niall Ferguson appeared on Fareed Zakaria's Global GPS (the best public affairs show on TV for my money). They appeared separately, but Zakaria is a capable questioner and understands the issues, so I think that the issues were well joined. I haven't seen it to the end, so I don't know where Zakaria comes down between the two (and perhaps it really is between them).
  2. Dave Brooks weighed in today, and Paul Krugman promptly blogged a response (he's quick with that blog!). It seems to me that all of Brooks' doubts could be laid on the austerity folks, so his uncertainty about theories on one side (the demand side/Keynesians) applies equally, if not more so, to the austerity crowd. Brooks quotes Keynes, but I find that a bit ironic, for the Demand Side theorists (as he refers to the Krugman crowd) are really looking to Keynes and the problem of a liquidity trap that monetary policy can't address. By the end, Brooks does make some concessions, such as unemployment benefits and the need for the states to receive some help in providing basic services.
  3. Robert Frank weighed in yesterday in the NYT with his usual good sense, recommending targeted fiscal policies to stimulate the economy. We don't want something like WWII, which helped pull us out of the Depression, and long-term debt is a bad thing, but Frank recognizes the need for further stimulus, which if wisely appropriated, will provide many benefits, including long-term debt reduction. Of course, the likelihood of Congress acting appropriately is slim. Here's what Frank writes:

    [A]s the nation struggles to emerge from the most severe downturn since the Great Depression, such cuts are the last thing we need. There is no conflict — absolutely none — between our twin goals of putting the economy back on its feet and reducing long-term deficits. On the contrary, government could take many steps that would serve both goals simultaneously.

  4. Someone out to be shouting off the rooftops, screaming bloody murder, about cuts to education. My personal connections with many educators aside, isn't it as clear as the hand in front of your face we need to spend more money on education?. Why are we laying off teachers? Because we don't have enough money? No! We don't want to spend the money. It's a choice; it's not something forced upon us. It's shameful and stupid.

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