Thursday, December 8, 2011

Paul Krugman’s big government prescription for Europe proves that U.S. liberals are stuck in a time warp

By Nile Gardiner

All over Europe governments have begun to implement austerity measures in an effort to rein in spending and reduce crippling budget deficits. It is hard to find a major European leader these days still advocating the kind of large-scale stimulus spending championed by the Obama Administration in the United States over the past three years. Ironically, the most vocal supporters of greater government spending in the EU can be found today in America.

In yet another hectoring New York Times piece last week on the European financial crisis (a follow-up to his November 10 article “Legends of the Fail”), imaginatively entitled “Killing the Euro”, Nobel Prize-winning economist Paul Krugman attacked “deficit scolds and inflation obsessives”, completely dismissing the idea that the EU debt disaster has anything to do with out-of-control spending:

“How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!

“But the truth is nearly the opposite. Although Europe’s leaders continue to insist that the problem is too much spending in debtor nations, the real problem is too little spending in Europe as a whole. And their efforts to fix matters by demanding ever harsher austerity have played a major role in making the situation worse.

“So the next time you hear someone claiming that if we don’t slash spending we’ll turn into Greece, your answer should be that if we do slash spending while the economy is still in a depression, we’ll turn into Europe. In fact, we’re well on our way.”
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