The latest Paul Krugman op-ed may be his most complete and clear summation of his views on politics and the economy, smartly drawing a comparison between the current state of things, and the state of play in 1938.His first paragraph says it all
Here’s the situation: The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.
Of course, the year is 1938, and the President is FDR, who listened to closely to the deficit hawks, and then upon failing to save the economy, lost the support of the people for more stimulus.
The only thing that saved us? The war
From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.
Krugman doesn’t want us to declare war on anyone, he just wants us to do something big.