Paul Krugmen seems shocked, truly shocked, and indignant to discover Mitt Romney, and the Republicans, are grossly misinterpretating economics facts and findings about our economic recovery in The Secret of Our Non-Success.
The main point, however, is that the Romney team is willfully, nakedly, distorting the record, leading Ms. Reinhart and Mr. Rogoff — who aren’t affiliated with either campaign — to protest against “gross misinterpretations of the facts.” And this should worry you.
According to Paul Krugman, professional economists have established that the 2008 financial crisis was uniquely severe and involved debt overhangs which will not lead to a typical business cycle recovery - it is going to "take years to restore full employment."
In other words, this is not President Obama's fault as is alleged by Romney and Ryan, who are trying to reduce this to a false equivalence of a "he said - she said" stand-off. Instead, Paul Krugman argues this is Romney and the Republicans taking a stand against science and fact, and this should worry us a great deal.
Harvard’s Carmen Reinhart and Kenneth Rogoff studied past similar financial crises, induced by the bursting of speculative bubbles, and found they are followed by prolonged years of "high unemployment and weak growth." Later research by the IMF, and others have confirmed this, according to Krugman, who also reminds us he too warned this downturn was different and needed greater stimulus for recovery.
History shows us that these kinds of financial crises are caused when speculative credit bubbles burst, leaving so many families and companies with such high levels of debt they are forced to reduce spending - and for a long time until this debt overhang is worked off. Our usual antidotes for recessions of cutting interest rates to encourage borrowing to boost consumer demand does not work, because too much debt already exists.
What we need, in these situations, is a Keynesian kind of government stimulus. It is exactly the wrong time for the "austerity plans" to be cutting government jobs and spending.
In particular, what the economy really needs after a financial crisis is a temporary increase in government spending, to sustain employment while the private sector repairs its balance sheet. And the Obama administration did some of that, blunting the severity of the financial crisis. Unfortunately, the stimulus was both too small and too short-lived, partly because of administration errors but mainly because of scorched-earth Republican obstruction.Paul Krugman warns us that if we let politicians get away with blatantly repudiating scientifically established facts, we will be on a slippery slope, where we can not imagine where it will end.
Look, economics isn’t as much of a science as we’d like. But when there’s overwhelming evidence for an economic proposition — as there is for the proposition that financial-crisis recessions are different — we have the right to expect politicians and their advisers to respect that evidence. Otherwise, they’ll end up making policy based on fantasies rather than grappling with reality.Satirically, he suggests that "the next thing you know Republicans will start rejecting the overwhelming evidence for man-made climate change. Oh, wait."
Can you imagine the kind of world we will leave our children, and future generations, if we start acting like ant-science Luddites, even to the point of our having our politicians and media taking science and critical thinking skills out of political discussion? What will be next - education, health care, and reproductive freedoms?
How will our nation, and workers be able to compete with emerging nations pulling all the stops to educate their children with math, science, and the best thinking skills possible? We could risk losing our leadership, not just in science, and research, but manufacturing and everything else.