So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.[……]
Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid.
All of this has helped support the economy in its time of need, in a way that didn’t happen back in 1930, when federal spending was a much smaller percentage of G.D.P. And yes, this means that budget deficits — which are a bad thing in normal times — are actually a good thing right now.
He goes on to credit the bailout and the stimulus as also helping to avert catastrophe.
Now, let’s be clear, no one did anything particularly brilliant here. The stimulus and the decision not to cut federal spending are straight out of the mainstream Keynesian playbook. (Let’s leave the bailout out of this because all kinds of arguments can be made about how it was implemented and whether or not it would have been necessary at all if Paulson had acted sooner.)
And yet, throughout the Republican party and in most quarters of the media, these decisions are regarded as controversial. Krugman recalls Boehner’s idiotic quote “it’s time for government to tighten their belts and show the American people that we ‘get’ it.”
The attack on economic common sense was two pronged, just as the attacks on health care reform are. With health care, it begins with the crazies talking about euthanizing your grand-parents and then shifts to Chuck Lane wanking about end-of-life counseling. With economics, it begins with Boehner’s bone-headed belt-tightening (if not some even fringier stuff supply-side or Austrian economics) and ends with more high-brow Fama/Mankiw whackadoodle.
And the fact that sane, mainstream economic decisions actually worked won’t help Obama politically as much as they should. There’s no way he can land on aircraft carrier and declare “Mission Accomplished” on the economy. And, no matter what happens with the economy, we’re going to hear a lot of TEH STIMULUS DIDN’t STIMULATE.
This isn’t isolated, of course. Bush I was excoriated for his sane, mainstream tax increases and probably lost the election as a result.
We’re in a place where sanity prevails in practical terms and craziness prevails in political terms.
Update. Per the comments, I do think that Obama will get credit (possibly too much) if and when the economy returns to pre-2008 levels of unemployment, etc. But in the meantime, I don’t think he’ll get much credit for taking what could have been a catastrophe and turning it into merely a bad recession.