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President Barack Obama took office in the midst of a financial crisis that had sent the U.S. economy into a tailspin. The two most pressing tasks of the incoming administration were to stabilize the economy and to restore economic growth. There was an intense debate among economists regarding the best way to deal with the crisis and to put the economy on a path to recovery.
Many economists argue that a stimulus would be the surefire way to ensure that the economy would regain its footing. Paul Krugman was an early and prominent advocate for a stimulus. He forcefully argued for a big stimulus. Other economists, particularly those of the conservative persuasion, criticized the idea of a big stimulus because they said that it would lead to inflation, hinder rather than facilitate economic recovery, and would spook the bond market, thereby making it more expensive for the U.S. to borrow money. They favored austerity as the best remedy for the ailing economy. Three years later, the verdict is in: Krugman, the Nobel Prize-winning economist, has been vindicated and the critics of the stimulus have been wronged, as none of their predictions had come to fruition