Obama Must Spend Boldly— or It's Great Depression II
Only government can save us now: Krugman
By Jason Farago,  Newser Staff
Posted Jan 5, 2009 7:55 AM CST
Barack Obama, accompanied by his Treasury Secretary-designate Timothy Geithner, left, and others, announces his economic team, Monday, Nov. 24, 2008, during a news conference in Chicago.   (AP Photo/Charles Dharapak)
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(Newser) – For decades economists believed that a second Great Depression was impossible; all the Fed had to do, they said, is print more money. But as Paul Krugman writes, monetary policy has failed; despite "supplying liquidity like an engine crew trying to put out a five-alarm fire," credit remains elusive and the economy is tanking. For the New York Times columnist, only fiscal policy—that is, massive government spending—can stave off a repeat of the 1930s.

Barack Obama said last week that we must "act swiftly and boldly" to avoid "a much deeper economic downturn that could lead to double-digit unemployment." But while America needs a Keynes-style spending blast, Congressional posturing might result in legislation that is delayed and watered-down. If that happens, writes Krugman, it'll be "only enough to slow the descent, not stop it."