Krugman: The Reason Government Spending Hasn't Saved The Economy Is That There Hasn't Been Any Government Spending

Paul Krugman

Photo: Dave Shankbone via Flickr

Paul Krugman goes back on the attack, arguing that the reason the economy is sputtering despite the stimulus is that the stimulus didn’t actually include a big surge in government spending.Ask yourself: What major new federal programs have started up since Mr. Obama took office? Health care reform, for the most part, hasn’t kicked in yet, so that can’t be it. So are there giant infrastructure projects under way? No. Are there huge new benefits for low-income workers or the poor? No. Where’s all that spending we keep hearing about? It never happened…

One compelling fact to back this up:

Since January 2009, the total number of government workers in the country has shrunk by 350,000, because state and local governments have been forced to cut back.

Government spending on goods and services, meanwhile, has only risen 3% per year for the past two years, less than it rose in the two preceding years.

So the reason the Keynesian approach hasn’t worked, Krugman says, is because it hasn’t been tried.

Thoughts?  (Go ahead and write in detail if you like–we’ll turn the best comments in to separate posts on this topic.)

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