Wednesday, September 25, 2013

The Depressed Economy In The US Is All About Austerity

Paul Krugman asked a simple question and he got a simple answer.  He compared total government spending during since the recession, which has been on a downward trend, with government spending that only continued on its trend line prior to the recession.  Its hard to be precise about his estimate of the impact of the reduction in government spending from its trend, but it is clear that unemployment would be well below its current level of 7.3%.  Fiscal policy in the US is responsible for much of the damage to our economy that we are experiencing today and perhaps into the future.  The graph below provides a good illustration of the deviation from trend.  Government spending has NOT been out of control as Republicans and its media partners have argued.  The decline in government spending has contributed greatly to our slow recovery.

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