Austerity Is Self-Defeating

Paul Krugman

Photo: NYtimes.com

With Tim Pawlenty — who was supposed to be a sensible Republican — going all-in for high voodoo, I thought it’s worth pointing out that at the moment there’s a pretty good case that there is a kind of Laffer curve in which more is less and less is more. Namely, there’s a good case that fiscal stimulus right now would actually improve the long-run fiscal situation, while fiscal austerity makes it worse.

Here’s a repost of part of a post from last year. I’d note that the numbers are even more favourable now, with the real interest rate on 10-year bonds just 0.79 per cent as of yesterday.Read the rest of this article at the New York Times.

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