US Economy Needs Less Caution, More Spending

Forget deficit; fret over threat of 'lost decade'
By Kevin Spak,  Newser Staff
Posted May 21, 2010 11:34 AM CDT
Paul Krugman talks about the economy at a gathering in Princeton, after he was announced the winner of the 2008 Nobel Prize in economics Monday, Oct. 13, 2008.   (AP Photo/Mel Evans)
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(Newser) – No matter what you've heard panicked commentators say, the US is not the next Greece, and the government is not trying to do or spend too much in the face of the slumping economy. In reality, Washington isn't doing or spending enough, and as a result, the US could be the next Japan, trapped in a lost decade of slow growth and high unemployment, warns Paul Krugman of the New York Times.

The Fed can't do anything—it's too hemmed in by worries about inflation, even though this week's consumer prices report showed we're actually in more danger of a crippling deflationary cycle. The Obama administration might well desire another stimulus, but it'd never get through a Congress spooked by deficit hawks. “In short,” Krugman concludes, “fear of imaginary threats has prevented any effective response to the real danger facing our economy.”

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