Paul Krugman: Why public has soured on government activism and lost faith in fiscal expansion

[Better Believe It]

1938 in 2010
By PAUL KRUGMAN
September 5, 2010

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.

Now, we weren’t supposed to find ourselves replaying the late 1930s. President Obama’s economists promised not to repeat the mistakes of 1937, when F.D.R. pulled back fiscal stimulus too soon. But by making his program too small and too short-lived, Mr. Obama did just that: the stimulus raised growth while it lasted, but it made only a small dent in unemployment — and now it’s fading out.

The story of 1937, of F.D.R.’s disastrous decision to heed those who said that it was time to slash the deficit, is well known. What’s less well known is the extent to which the public drew the wrong conclusions from the recession that followed: far from calling for a resumption of New Deal programs, voters lost faith in fiscal expansion.

Consider Gallup polling from March 1938. Asked whether government spending should be increased to fight the slump, 63 percent of those polled said no. Asked whether it would be better to increase spending or to cut business taxes, only 15 percent favored spending; 63 percent favored tax cuts. And the 1938 election was a disaster for the Democrats, who lost 70 seats in the House and seven in the Senate.

Read the full article at:

http://www.nytimes.com/2010/09/06/opinion/06krugman.html?partner=rssnyt&emc=rss

[OHdem10]

1. What can we expect from New Democrat, DLC Administration.

eweeeee FDR had cooties.

[Hawkowl]

2. We are completely and totally FUCKED

Even if the dems hold on to both houses of Congress, Obama is held under the disastrous influence of his own Rasputin's, i.e; Summers, Geithner and Rahm. Even if Obama has a natural tendency to side with Keynesian/FDR style programs, his advisors' insistence on free trade, supply side/Chicago School/monetarist economists simply will doom the entire country to failure.

[Tippy]

3. Rahm may be out of the picture soon....

Mayon Daily anounced he will not run for anotherterm today...and Rahm has said more thn once he would like to be Chicago's Mayor

[Hawkowl]

5. As a former Chicagoan

I'd bet my ass Rahm couldn't win. No effin way.

[glitch]

4. And he's so committed to this path it would be difficult to make a change.

If he'd had a few actual economists like Stiglitz, Baker, Galbraith, even Krugman as an advisor, on his team a change in direction now wouldn't have appeared so radical.