TW: Many folks are conflating our medium and long-term fiscal problems with the current fiscal situation. I have said before and will keep repeating, the implementation of fiscal constraints amidst a massive demand contraction would have and would still result in a vicious circle of even worse demand contraction. In other words a repeat of the Hoover approach of the early 1930's.
Most Republican politicians realize this but will keep conflating the issues right up until the time they regain political power at which point they will throw their fiscal concerns right back in the hamper where they resided until Jan 20th, 2009 to be replaced by the call for "supply side" (i.e.for the wealthy)tax cuts. The tax cuts that allegedly magically pay for themselves but somehow never do.
From Paul Kedrosky:
"In his latest column, the FT’s Martin Wolf spanks historian Niall Ferguson for his recent column equating Greece and the U.S. Here is the money ‘graph from Wolf’s latest:
'If these governments had decided to balance their budgets [in 2009/2010], as [Niall Ferguson and] many conservatives demand, two possible outcomes can be envisaged: the plausible one is that we would now be in the Great Depression redux; the fanciful one is that, despite huge increases in taxation or vast cuts in spending, the private sector would have borrowed and spent as if no crisis at all had happened. In other words, a massive fiscal tightening would actually expand the economy. This is to believe in magic.' "http://paul.kedrosky.com/archives/2010/02/martin_wolf_spa.html
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