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Enough about the Deficit: It's Time to Spend

The Fed can't help much, but the government can

By Clay Dillow, Newser Staff

Posted Oct 17, 2008 10:32 AM CDT

(Newser) – Volatile markets rule the headlines, but the imperiled nonfinancial economy is more worrisome, Paul Krugman writes in the New York Times. The way to get that rolling again, contrary to what John McCain said in Wednesday’s presidential debate, is to ignore the deficit and increase government spending. As retail sales plunge alongside industrial production, “all signs point to an economic slump that will be nasty, brutish—and long.”

It’s nearly certain unemployment is headed above 7%. And with no new bubble to replace the housing boom, recovery remains elusive. But spending could provide needed infrastructure improvements, jobs, increased unemployment benefits and aid to state and local governments so they don’t hatchet their own budgets. “Now is not the time to worry about the deficit.”

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Paul Krugman listens to his introduction at a gathering in Princeton, after he was announced the winner of the 2008 Nobel Prize. (AP Photo/Mel Evans)

Plunging markets have been getting all the press lately , but Krugman says it's the real, nonfinancial economy that should be worrisome. (AP Photo/Lai Seng Sin)

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McCain calls for spending freeze. Obama says it won't work. (RollingPress)

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There’s not much Ben Bernanke can do for the economy. He can and should cut interest rates even more — but nobody expects this to do more than provide a slight economic boost.
- Paul Krugman

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Enough about the Deficit: It's Time to Spend