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."