The Failure of the Austerity Doctrine

Paul Krugman today in the NY Times:

"Last week the National Institute of Economic and Social Research, a British think tank, released a startling chart comparing the current slump with past recessions and recoveries. It turns out that by one important measure — changes in real G.D.P. since the recession began — Britain is doing worse this time than it did during the Great Depression. Four years into the Depression, British G.D.P. had regained its previous peak; four years after the Great Recession began, Britain is nowhere close to regaining its lost ground.

Nor is Britain unique. Italy is also doing worse than it did in the 1930s — and with Spain clearly headed for a double-dip recession, that makes three of Europe’s big five economies members of the worse-than club. Yes, there are some caveats and complications. But this nonetheless represents a stunning failure of policy.

And it’s a failure, in particular, of the austerity doctrine that has dominated elite policy discussion both in Europe and, to a large extent, in the United States for the past two years. [snip]

...Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for 'brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.' He then called on President Obama to 'do a Cameron' and pursue 'a radical rollback of the welfare state now.'

Strange to say, however, those warnings from economists proved all too accurate. And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron."

Now let's see what lessons Fred "Mr. Dinky" Hiatt has for us in today's Kaplan Daily:

"If America doesn’t tackle its debt problem, everything else is at risk: economic growth, the safety net for the poor, investment in research and roads. Over the past two years, Obama and congressional Republicans have squandered one chance after another to get serious about fiscal reform. A better political moment is always just over the horizon."

Alas, poor Mr. Dinky. Still cluelessly ringing the Broder/ Rethuglican austerity bell.