When it comes to spending or saving, it's always a contentious debate.
But the risks are rarely as high as they are now for the U.S. and most major industrial nations. Such fundamental economic decisions will move a country forward (or backward) for decades, not months, and can't be undone quickly.
So let's choose the "winner" and "loser" of this debate carefully.
Yahoo's Daily Ticker host Henry Blodget pronounced last week that Nobel Prize winning economist Dr. Paul Krugman "won" the vicious argument fought between those who want to increase government spending as a means of rebuilding our economy, and those who want to cut spending and reduce deficits as a means of restoring confidence (and rebuilding our economy).
Paul Krugman May Be the World's Last Flat Earth Economist
Nobel Prize-winning economist and New York Times columnist Dr. Paul Krugman is at it again.
A favorite of the Keynesian crowd, he claimed earlier this week that fixing the deficit is important but added that "doing it now would be disastrous." He also observed that the 10-year U.S. debt situation isn't really all that bad.
At least he's consistent. I'll give him that.
For five years now Dr. Krugman has argued that increasing U.S. government spending is vital to our nation's recovery. And for five years he's been dead wrong.
Since this crisis began, the United States has spent trillions...more money than any nation in history. In the process, it's gone from being the world's biggest creditor to the biggest debtor of all time.
In fact, our national debt is now so high that people literally can't count the zeros. So most have thrown up their hands in exasperation and given up trying.
Now, to be perfectly clear, I don't believe Dr. Krugman is stupid. Far from it - you don't win Nobel Prizes for being an idiot. However, I do believe that he's trapped in the past--an acolyte of sorts to failed economic policies and doctrine that dates to the 1930s.
Some people, like University of Chicago Finance Professor John H. Cochrane, are more pointed, noting that if Krugman were a scientist, he'd be akin to a "flat-earther," an "AIDS-HIV disbeliever" or somebody who believes the continents don't actually move.
This makes him very dangerous in the scheme of things because Dr. Krugman's solution is that "we" just haven't spent enough money...yet.
I don't know how he can make that argument with a straight face.
U.S. Economy Showdown: Krugman vs. Bernanke
Nobel Prize winning economist Paul Krugman has some critical words for how Team Bernanke is handling the U.S. economy.
The Princeton University professor suggested on Bloomberg Television's "Street Smart" program Monday that U.S. Federal Reserve policy makers, under the guidance of Chairman Ben Bernanke, are "reckless" for refusing to pursue inflation.
Krugman argues that higher inflation could lower the staggering U.S. employment rate that has lingered for more than four years.
"The reckless thing is to allow mass unemployment to continue," Krugman said Monday. "We have had a massive failure of our political system that has come to accept that 8% unemployment is the new normal and there is nothing that can be done. We're in a low-key version of the Great Depression."
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