Are New Spending Cuts Repeating 1937?
"The world's rich countries are now conducting a dangerous experiment," writes David Leonhardtdramatically in The New York Times. "They are repeating an economic policy out of the 1930s --starting to cut spending and raise taxes before a recovery is assured--and hoping today's situation is different enough to assure a different outcome." He covers the debate on whether or not this is a wise move, asking whether the private sector "make up for the withdrawal of stimulus." He says there's "good evidence" to lean either way.
While the "laissez-faire economists, Congressional Republicans, German leaders" and others who insistently oppose spending may not realize "how much worse" economic conditions could become, that doesn't mean their concerns about deficits are unfounded. "In an ideal world," Leonhardt writes, "countries would pair more short-term spending and tax cuts with long-term spending cuts and tax increases. But not a single big country has figured out, politically, how to do that."- Lessons of History "Sometimes, if first you don't succeed try, try again is bad advice," comments economist Mark Thoma. "Balancing the budget before the economy was ready to stand on its own didn't work last time we we trying to exit a severe recession, so why try the same thing again? The time to address budget issues will come, but that time is not here yet."
- No Kidding Berkeley economist Brad DeLong looks at Leonhardt's quote from expert Adam Posen, which says that "the chances we're going to come out of this O.K. are still larger than the chances that we aren't." Responds DeLong: "I think that Adam Posen has a different definition of
