by Bill McBride on 6/17/2010 11:59:00 PM
Thursday, June 17, 2010
From Paul Krugman in the NY Times: That '30s Feeling
Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere ...And as if on cue, from Alan Greenspan wrties in the WSJ: U.S. Debt and the Greece Analogy
Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession.
An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon.I believe Greenspan is flat wrong - just as he was in 2001 when he Greenspan spoke of "an on-budget surplus of almost $500 billion ... in fiscal year 2010". Greenspan offered a projection of "an implicit on-budget surplus under baseline assumptions well past 2030 despite the budgetary pressures from the aging of the baby-boom generation, especially on the major health programs."
I argued Greenspan was wrong then, and I believe he is wrong now.
I believe the focus right now needs to be on jobs, jobs and jobs.
Posted by Bill McBride on 6/17/2010 11:59:00 PM