Herbert Hoover Redux

Or the 1937 version of Roosevent...

Here's a blog posting by Paul Krugman pointing out the bad reasoning behind being a 'deficit hawk' in the middle of a very bad recession:

There’s an economists’ duel underway in Britain. Everyone agrees that Britain needs to address its underlying budget deficit; but how fast? One group of prominent economists has published a letter saying that cuts should start more or less immediately.

But an equally or maybe even more prominent group disagrees, pointing out that slashing spending now would depress a still very weak economy. Their letter isn’t public yet; I’ll post a link when it is.

As you might guess, I’m very much in agreement with the second group. It’s important to be clear that the call for immediate austerity isn’t grounded in unarguable economics; in fact, the arithmetic tells you that what Britain does in the next year or two is virtually irrelevant to its long-run solvency. Instead, the call for immediate austerity is based on an appeal to “credibility”, which is very much in the eye of the beholder.

So for Britain’s sake, I hope that the UK version of 21st century Hooverism doesn’t prevail.

Go read the original posting to get the links he has embedded.