Not only has the US economy been "stuck in a rut," but now a "destructive passivity has overtaken our discourse," writes Paul Krugman in the New York Times. The common wisdom today is that there is nothing the government can do in the short run to help the economy, so we should concentrate on the long run. "This gets things exactly wrong," says the Nobel Prize winner. "The truth is that creating jobs in a depressed economy is something government could and should be doing."
Failure to create jobs is, according to Krugman, a political choice, justified by poor excuses. A rebound is coming, the government says. Apparently not, responds Krugman. More debt will cause bond rates to soar, goes the prevailing "wisdom." No, interest rates are at a low, low 3.03%, Krugman notes. But the stimulus didn't work, say pundits. No, there was no stimulus—much of the money went to tax cuts, and most of the additional spending went to aid, not public works, Krugman argues. Even the $46 billion budgeted to help homeowners remains largely unspent, with just $2 billion used so far. "The economy isn’t fixing itself," says Krugman, adding, "you’d think the problem was 'no, we can’t.' But the reality is 'no, we won’t.'" (More Paul Krugman stories.)
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