Top economics writers are sending some scary signals this week. Just as June unemployment numbers are due, Paul Krugman’s declaring that we could be headed for a third Depression, and David Leonhardt, also writing in the New York Times, quotes source after source saying, “The world’s rich countries are now conducting a dangerous experiment.”
The dangerous experiment, both writers agree, is the idea of belt-tightening when more spending is needed, of letting stimulus lapse when most people are still struggling for jobs. During the Great Depression, when business started to improve, Roosevelt vowed to balance the budget—and sent the country back into decline. The only thing that yanked the economy into a different direction was the buildup to war and war itself.
We’ve got better ideas than that, now, right? Maybe not. A year ago, former Treasury Secretary Larry Summers told the BBC at Davos that ’90s-style growth simply isn’t coming back. Yet, shunning a government jobs-creation scheme, the president’s still hoping against hope for private industry created jobs. No reason to believe the private sector will do anything different than what its done these last two years. Productivity’s up with slashed wages and workers. The private sector’s doing fine. And now the deficit hawks are circling.
So what’s the plan, Uncle Sam? In many places, the military’s the only job offer out there. Democrats in Congress just cut $13B from schools to fund $33B on Afghan escalation. Maybe that’s the plan.