Paul Krugman calls for continued government support

Despite those warm eyes and soft smile, this is the face of a very angry man.

NYT columnist Paul Krugman schooled the government with his wrath-filled editorial last week. He invoked everything from the Great Depression to a year of grief ahead in an attempt to convince the feds that we need more stimulus than ever to keep the economy afloat.

The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.

But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.

The reason we are seeing blips of recovery, according to the Nobel-prize winning economist, is due to an “inventory bounce.” Continue reading

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Paul Krugman: recent grads who are unemployed will suffer permanent career damage

paul-krugman

Hey Paul, so um...do you need an assistant?

The NYT Nobel-prize-winning columnist isn’t happy with the government right now. He believes Obama needs to do more to foster job creation. He praises the stimulus plan but says it’s too little of a good thing.

Suppose that the economy were to keep growing at 3.5 percent. If that happened, unemployment would eventually start falling — but very, very slowly. The experience of the Clinton era, when the economy grew at an average rate of 3.7 percent for eight years (did you know that?) suggests that at current growth rates we’d be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment.

But wait, it gets worse. Turns out recent grads caught in bad timing will suffer permanent consequences in their careers.

But anyone who really cared about the prospects of young Americans would be pushing for much more job creation, since the burden of high unemployment falls disproportionately on young workers — and those who enter the work force in years of high unemployment suffer permanent career damage, never catching up with those who graduated in better times.

That sound you hear is the crackling of my diploma burning.