The Economist in Chief for the New York Times has been pleading for our government to spend more, spend heavily and spend it now. Nobel Paul insists we must spend and spend until the economy improves. Like the old carpenters joke “I measured twice and cut twice, but the board was still too short”, Krugman would have us keep cutting the board until it is long enough.
Thankfully no one is listening, not even Barack Obama. Perhaps hoping for a more appreciative ear across the pond, Krugman turned to England. His urgings for the U.K. to spend its way out of debt prompted the UK Telegraph to run the headline that is the title of this post.
“Professor Krugman lambasts Britain’s coalition government in his latest column for its deficit reduction plan, which he reckons will condemn the UK to a depression.
Here’s a taste: “What happens now? Maybe Britain will get lucky, and something will come along to rescue the economy. But the best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it”.
Krugman is obviously referring to the Roosevelt era and inferring that the Great Depression occurred because FDR did not spend enough. When Roosevelt assumed office the National debt was less than 20% of GDP. By the end of his first term it was 50% of GDP, now it is about 90%. On May 9, 1939, after 7 years of the Roosevelt administration, Henry Morgenthau, FDR’s Treasury Secretary and chief architect of the New Deal said “We have tried spending money. We are spending more than we have ever spent before and it does not work.”
Now just who is it that is refusing to learn from the past?