The following is an excerpt from End This Depression Now!, the recently published book by Nobel Prize-winning economist and New York Times columnist Paul Krugman. Purchase it here.
By the fall of 2009 it was already obvious that those who had warned that the original stimulus plan was much too small had been right. True, the economy was no longer in free fall. But the decline had been steep, and there were no signs of a recovery fast enough to bring unemployment down at anything more than a glacial pace.
This was exactly the kind of situation in which White House aides had originally envisaged going back to Congress for more stimulus. But that didn’t happen. Why not?
One reason was that they had misjudged the politics: just as some had feared when the original plan came out, the inadequacy of the first stimulus had discredited the whole notion of stimulus in the minds of most Americans and had emboldened Republicans in their scorched-earth opposition.
There was, however, another reason: much of the discussion inWashingtonhad shifted from a focus on unemployment to a focus on debt and deficits. Ominous warnings about the danger of excessive deficits became a staple of political posturing; they were used by people who considered themselves serious to proclaim their seriousness. As the opening quotation makes clear, Obama himself got into this game; his first State of the Union address, in early 2010, proposed spending cuts rather than new stimulus. And by 2011 blood-curdling warnings of disaster unless we dealt with deficits immediately (as opposed to taking longer-term measures that wouldn’t depress the economy further) were heard across the land.