Paul Krugman explains why despite the very encouraging job numbers this month, the US economy is by no means in the clear. Who is to blame for the continued instability? The supply siders obsessed with deficits and small government:
Very early in this slump — basically, as soon as the threat of complete financial collapse began to recede — a significant number of people within the policy community began demanding an early end to efforts to support the economy. Some of their demands focused on the fiscal side, with calls for immediate austerity despite low borrowing costs and high unemployment. But there have also been repeated demands that the Fed and its counterparts abroad tighten money and raise interest rates.
What’s the reasoning behind those demands? Well, it keeps changing. Sometimes it’s about the alleged risk of inflation: every uptick in consumer prices has been met with calls for tighter money now now now. And the inflation hawks at the Fed and elsewhere seem undeterred either by the way the predicted explosion of inflation keeps not happening, or by the disastrous results last April when the European Central Bank actually did raise rates, helping to set off the current European crisis…..Every time we get a bit of good news, the purge-and-liquidate types pop up, saying that it’s time to stop focusing on job creation.
The conservative preoccupation with debt and austerity measures is, in my opinion, nothing to do with wanting to save the economy. The truth is that precious government money is being funelled into job creation at the bottom end – blue collar jobs and cheap labor. The rich are not enemies of the government stimulating the economy (anyone remember the Wall St bailout?), it just has to be at the right end of the spectrum.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.