is what Paul Krugman calls American economic policy since the failure of Lehman Brothers five years ago. His column this morning, titled Years of Tragic Waste, is as blunt and to the point as Krugman usually is on issues like this. As he says near the beginning of piece,
Suddenly, we were looking at the possibility of real economic catastrophe.Lest anyone have any doubt, and choose to point at how much better off we are than some other countries, say Greece, Krugman reminds us
And the catastrophe came.
there are degrees of disaster, that you can have an immense failure of economic policy that falls short of producing total collapse. And the failure of policy these past five years has, in fact, been immense.One more blockquote before the cheese-doodle to put it in context:
Reasonable measures of the “output gap” over the past five years — the difference between the value of goods and services America could and should have produced and what it actually produced — run well over $2 trillion. That’s trillions of dollars of pure waste, which we will never get back.As Krugman notes, there is a drop of employment from 63% of the adult population to less than 59%, a level at which it has stagnated.
The guts of Krugman's argument is, as he has argued all along, that the stimulus was far too small, and too heavily tilted towards tax cuts and not spending. One paragraph puts it in the proper context:
Set aside the politics for a moment, and ask what the past five years would have looked like if the U.S. government had actually been able and willing to do what textbook macroeconomics says it should have done — namely, make a big enough push for job creation to offset the effects of the financial crunch and the housing bust, postponing fiscal austerity and tax increases until the private sector was ready to take up the slack. I’ve done a back-of-the-envelope calculation of what such a program would have entailed: It would have been about three times as big as the stimulus we actually got, and would have been much more focused on spending rather than tax cuts.Krugman goes through the impact of such an approach on debt - it would have been perhaps a trillion higher, but that would have been offset partially by the growth in the economy so that the debt as a percentage of GDP would only have been a few percent higher, which he argues would not have represented anything serious, despite those who artificially draw lines about supposed points of financial no return (my phraseology).
He remarks about dueling arguments for framing the discussion:
Republicans who denounce any kind of government action — who insist that all the policies and programs that mitigated the crisis actually made it worse — and Obama loyalists who insist that they did a great job because the world didn’t totally melt down.Then he concludes with a brief paragraph, from which I took my title:
Obviously, the Obama people are less wrong than the Republicans. But, by any objective standard, U.S. economic policy since Lehman has been an astonishing, horrifying failure.Let me add the following, not addressed by Krugman in this piece.
Please remember who was a key advisor to Obama in crafting the policy that Krugman criticizes as "an astonishing, horrifying failure" - Larry Summers - and then ask yourself if you really think, no matter how personally "comfortable" the President may be with him, any sensible person would elevate him to head of the Federal Reserve?
IF we cannot get Krugman in that position, and since Secretary of Treasury is also already filled, Krugman has provided us with real ammunition against Summers, and perhaps in favor of Yellen, should we be so lucky.
In any case, it is not a great political argument to take to the American people to say "trust us, we do not suck as badly as the other guys."
How about the administration, however belatedly, taking an approach to economic policy that shows that it really cares what happens to ordinary Americans? Then maybe Dr. Krugman could write a different kind of column?
We can only wish.