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TUESDAY, NOVEMBER 24, 2009
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 OPINION 
25

It's Too Soon for Feds to Ease Up on Economy

If Washington cuts off the cash, recession will worsen: Krugman

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(Newser) – With critics prematurely calling on Washington to scale back financial rescue efforts, economic history fans see “déjà vu all over again,” writes Paul Krugman in the New York Times. This is the third time a major economy has been stuck in a liquidity trap, and both previous times these same calls for restraint have been heeded—with disastrous results.

The New Deal sparked growth until 1937, but after the Fed tightened rates and FDR tried to balance the budget, the economy slumped again. Japan met the same fate in 1997. Today, unemployment is still rising, and “we’re not even experiencing the kind of growth that led to the big mistakes of 1937 and 1997,” Krugman argues. “It’s way too soon to declare victory.”

Arthur Laffer is seen in this file photo. Laffer, of Laffer Curve fame, is worried about inflation.
Arthur Laffer is seen in this file photo. Laffer, of Laffer Curve fame, is worried about inflation.   (Business Wire)
If we stop spending now, we'll probably fall back into recession, Krugman argues.
If we stop spending now, we'll probably fall back into recession, Krugman argues.   (Shutterstock)
Paul Krugman speaks after he was announced the winner of the Nobel Prize in economics, Oct. 13, 2008.
Paul Krugman speaks after he was announced the winner of the Nobel Prize in economics, Oct. 13, 2008.   (AP Photo)
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It’s much too soon to give up on policies that have, at most, pulled us a few inches back from the edge of the abyss. - Paul Krugman

If the government weren’t running a big deficit right now, the economy would probably be well on its way to a full-fledged depression. - Paul Krugman

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25 comments
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ClingingToHope
Jun 15, 09 9:55 AM CDT
All that the "New Deal" did was to extend the Great Depression; but the democrat party got its power on! Reply
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-4
IN RESPONSE:
Forderon
Jun 15, 09 12:16 PM CDT
And all Reagan did was start the current recession: http://www.nytimes.com/2009/06/01/opinion/01krugman.html
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+1
IN RESPONSE:
Snowleopard
Jun 15, 09 1:44 PM CDT
"All that the "New Deal" did was to extend the Great Depression" this is a revisionists view of history, promoted by ideologues too blind to see the failings of the invisible hand of capitalism.
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+2
IN RESPONSE:
John
Jun 15, 09 1:58 PM CDT
Thank goodness that they do have their power on. The republic party f---ed things up so bad that it will take the Democratic party a while to fix.
Vote up! Vote down!
+1
IN RESPONSE:
psycada
Jun 15, 09 2:04 PM CDT
The cause of the current economic crisis is directly attributed to the induction of the Federal Reserve and the 14th Amendment. Unfortunately, it was clever bankers that weaseled the vote through congress after most Senators left for the Christmas Break. The one thing all you Dems in the republican vs dems group people keep missing is the fact that Woodrow Wilson alone signed could have stopped this from happening. Read a little about Wilson if you would, yo'll quickly stop blaming republicans and keep your mouths shut ater you realize it was a Dem that sold the entore effing country up the river, and even wrote in his Presidential Memiors about regretting that choice. Now STFU with the republican/dems Bull Shit. It is counterproductive for Americans, and it keeps us fighting each other instead of our Central Government. We again need to realize we are not Dems/Repubs/Inds...We are Americans. As soon as we start acting like it, we can kick the bankers out and repeal the dumb ass, illegal and unconstitutional Federal Reserve!
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-1

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