Krugman Says Federal Government Didn't Go Far Enough in Exploiting Financial Crisis
The progressive mindset is a curious one, as evidenced by New York Times columnist and Nobel Economics Prize recipient Paul Krugman.
Krugman appeared on MSNBCâs Sept. 23 âThe Rachel Maddow Showâ and lamented that the Obama Administration missed the opportunity the recent financial crisis offered to fundamentally change how the American economy operates. Host Rachel Maddow asked Krugman what the Great Depression taught economists when it comes to avoiding a repeat.
âIt taught us a lot about how to avoid one, which is that you really have to, have to put some constraints. I mean, it sort of roughly, banking is very useful but extremely dangerous and banks have to have all kinds of â you know, fencing put around them as a protection. They have to have some guarantees so that we donât have bank runs, so people know their money is safe. But then, we also have some regulation so that bankers donât take huge risks with other peopleâs money on a âheads I win, tails you loseâ basis.â
According to Krugman, some of those lessons have been forgotten.
âWe forgot all of that,â Krugman continued. âThe short line about how we got on to this crisis is we forgot what our grandfathers learned at great expense. Getting out of â now that weâre in the mess â thatâs much harder. I mean, the last time we got out of it with a world war, which is not something we hope to repeat.â
Still, Krugman spoke wistfully of the massive government intervention that World War II facilitated.
âIt was an enormous fiscal stimulus,â Krugman said. âIt was, you know â weâre getting all worked up about Obama who would be spending at max about 2.5 percent of the gross domestic product. World War II, of course, was more than 40 percent of gross domestic product at its peak. So this is trivial stuff that weâre doing now. Luckily, itâs not confronting a Great Depression.â
Worst of all,
âBut I get depressed sometimes about the Depression because the lesson of the Depression seems to be that getting out of this sort of thing requires efforts on the scale that is outside the realm of whatâs politically discussible right now,â he said.
The regret: Krugman fears the federal government didnât adhere to the battle cry of White House Chief of Staff Rahm Emanuel, and let the opportunity to campaign for a government intervention in the private economy âgo to waste.â
âYou know, the Rahm Emanuel line, âNever let a crisis go to waste?â But you know, itâs starting to look like we did,â Krugman said. âAnd now, things are not good. Unemployment is high â itâs still rising. But the sense that we have got to act because otherwise the world might end is fading away and that makes it very hard to do stuff.â