Coulda Been Worse, by Paul Krugman, in NY Times: Josh Lehner does something I’ve been meaning to do: he compares US economic performance since the financial crisis with other episodes of major financial crisis. And guess what? We actually look better than most (sorry about the small print):
This comparison actually tells us quite a lot.
First of all, it makes immediate nonsense of the talking point that Obama must be doing terrible damage to our economy by threatening universal health care, or looking at businessmen funny, or something. Listening not just to Republican politicians but to a fair number of credentialed economists, you’d think that our protracted economic weakness is a puzzle to be explained – and that it somehow must reflect the alleged leftist tilt of the current administration. In fact, however, protracted weakness is normal after a big financial crisis, and if anything we’re doing better than average, probably thanks to fiscal and monetary stimulus.
That said, we should have done even better: if stimulus works, and the evidence says that it does, we should have done more, and made the slump even shorter and shallower.
In this context, look at Japan. People always ask whether we’ll do as badly as Japan; so far, at least, we’re doing far worse. I think you can make a good case that Japan was highly effective in its use of fiscal stimulus to limit the damage from financial crisis; where it failed was in not pursuing expansionary monetary policy during the good years to lift itself out of deflation.
So thanks to Josh Lehner for this. The truth about our crisis is not what everyone says.
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