averting the second Great Depression

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In a follow-up to his piece about how deficits saved the world, Paul Krugman wrote "Averting the Worst" on how we backed away from the precipice of complete collapse. "So it seems that we aren't going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government:"

Probably the most important aspect of the government's role in this crisis isn't what it has done, but what it hasn't done: unlike the private sector, the federal government hasn't slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid. [...]

In addition to having this "automatic" stabilizing effect, the government has stepped in to rescue the financial sector. [...] The point is that this time, unlike in the 1930s, the government didn't take a hands-off attitude while much of the banking system collapsed. And that's another reason we're not living through Great Depression II.

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. [...] All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.

Krugman also asks, "aren't you glad that right now the government is being run by people who don't hate government?" and Washington Monthly's Steve Benen notes that "There was an obvious course, and Obama and congressional Democrats took it:"

Republicans were the one standing in the middle of the road, insisting Dems were going in the wrong direction. They had it backwards.

Worse, even now, Republicans think they were right -- right about Bush's tax cuts, right about deregulation, right about Obama's recovery strategy, right about the spending freeze. It's not enough that they've been wrong every step of the way; they also fail to learn from their mistakes.

DougJ at Balloon Juice observes that "the fact that sane, mainstream economic decisions actually worked won't help Obama politically as much as they should:"

There's no way he can land on aircraft carrier and declare "Mission Accomplished" on the economy. And, no matter what happens with the economy, we're going to hear a lot of TEH STIMULUS DIDN't STIMULATE.

Oh, for the days when the media would drop to their knees over a cheesy presidential photo-op...

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This page contains a single entry by cognitivedissident published on August 11, 2009 12:53 PM.

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