Paul Krugman says that the jobs report confirms that we’re plunging right back toward another Great Depression.
We’ve lost 6.5 million jobs since the peak. After adjusting for population growth, we’re down 8.5 million. As Richard Bernstein noted yesterday, wages and the workweek are also declining.
Obama’s stimulus, meanwhile, promises to create 3.5 million jobs by the end of next year (if you believe the projections). So, by then, assuming no further loss in jobs (please), we’ll be about 5 million below where we should be. And state and city budget pressures are wiping out many of the benefits of the federal stimulus. So we’re setting ourselves up for another lost decade.
Krugman’s answer, not surprisingly, is more stimulus now:
All of this is depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren’t aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.
So have we failed to learn from history, and are we, therefore, doomed to repeat it? Not necessarily — but it’s up to the president and his economic team to ensure that things are different this time. President Obama and his officials need to ramp up their efforts, starting with a plan to make the stimulus bigger.
Just to be clear, I’m well aware of how difficult it will be to get such a plan enacted…
Krugman argues that the risk of letting the economy completely collapse is greater than the risk of having a massive short-term deficit and huge national debt mountain. This is where he differs from Republicans, centrist Democrats, and economists like Niall Ferguson and John Taylor, many of whom, he feels, are in the process of disgracing themselves.
In case you think the “back to the 1930s” rhetoric is scare-mongering, take a look through these charts:
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