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US: policy paralysis? « Previous | |Next »
September 12, 2010

In the New York Review of Books Robin Wells and Paul Krugman ask: 'The Slump Goes On: Why? Their concern is with the US.

They say that from mid-2009 many indicators have been pointing up: GDP has been rising in all major economies, world industrial production has been rising, and US corporate profits have recovered to pre-crisis levels.

Yet unemployment has hardly fallen in either the United States or Europe—which means that the plight of the unemployed, especially in America with its minimal safety net, has grown steadily worse as benefits run out and savings are exhausted. And little relief is in sight: unemployment is still rising in the hardest-hit European economies, US economic growth is clearly slowing, and many economic forecasters expect America’s unemployment rate to remain high or even to rise over the course of the next year.

The economic recovery has been too weak to generate enough new jobs. And as Americans fail to find good jobs, they cut back spending still more. What is more , the prospects for an immediate improvement in the labor market seem bleak: the nation will not get the fiscal stimulus required to put sufficient numbers of people back to work;

Wells and l Krugman say that most of the economic commentary is backward-looking, asking how we got into this mess rather than telling us how to get out---they don’t offer much guidance on the most pressing problem at hand, which is how to deal with the continuing consequences of the last one.


Their argument is that the relative absence of proposals to deal with mass unemployment is a case of “self-induced paralysis”---politicians, government officials, and economists alike have suffered a failure of nerve—a failure for which millions of workers will pay a heavy price.

| Posted by Gary Sauer-Thompson at 10:33 PM | | Comments (1)


Prof. Krugman is a well-known advocate for much larger fiscal intervention by Govts. to end GFC-induced recession and unemployment.

He regularly argues against those who advocate balanced budgets and "fiscal responsibility" as being not only out of touch with the reality of unemployment but also economically and financially badly mistaken.

It is therefore interesting to see that the US military is taking up the cudgels for just those ideas of reduced Govt. spending and debt that Prof. K. constantly attacks - see Washington's Blog here:

"The Joint Operating Environment 2010 report, or JOE 2010, released March 15 by the United States Joint Forces Command, or USJFCOM, warned that "even the most optimistic economic projections suggest that the U.S. will add $9 trillion to the [national] debt over the next decade, outstripping even the most optimistic predictions for economic growth upon which the federal government relies for increased tax revenue."

"The USJFCOM expressed concerns that the burgeoning U.S. national debt represented a threat to U.S. national security..."