A Krugman Prediction of Doom

Paul Krugman is a very bright guy who is right almost all the time. In his NY Times op-ed column he is worrying that the Obama administration is going to make a classic economic error:

Here’s what’s coming in economic news: The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.

But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.

This shouldn’t be happening. Both Ben Bernanke, the Fed chairman, and Christina Romer, who heads President Obama’s Council of Economic Advisers, are scholars of the Great Depression. Ms. Romer has warned explicitly against re-enacting the events of 1937. But those who remember the past sometimes repeat it anyway.

Go read the whole article for all the gory details. It is a sad, sad story. But I've learned to expect high promise and low delivery from Obama. He is a terrible disappointment. Krugman says I should have seen it coming, but my perspective was that Edwards was the best choice but he faltered (and latter was shown to be a sexual cad), Clinton was completely unacceptable to me (because the US does not need a War of the Roses (two houses, Bush and Clinton that control power for generations). So Obama was the only choice left. He looked good. I especially liked the idea of racial healing. But all this has come to ashes and dust as this muddler had "compromised" into ridiculous positions across the board. A tragedy!