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<div class="timestamp">October 11, 2012</div>
<h1>Triumph of the Wrong?</h1>
<h6 class="byline">By
<span><span>PAUL KRUGMAN</span></span></h6>
<div id="articleBody">
<p>
In these closing weeks of the campaign, each side wants you to believe
that it has the right ideas to fix a still-ailing economy. So here’s
what you need to know: If you look at the track record, the Obama
administration has been wrong about some things, mainly because it was
too optimistic about the prospects for a quick recovery. But Republicans
have been wrong about everything. </p>
<p>
About that misplaced optimism: In a now-notorious January 2009 forecast,
economists working for the incoming administration predicted that by
now most of the effects of the 2008 financial crisis would be behind us,
and the unemployment rate would be below 6 percent. Obviously, that
didn’t happen. </p>
<p>
Why did the administration get it wrong? It wasn’t exaggerated faith in
the power of its stimulus plan; the report predicted a fairly rapid
recovery even without stimulus. Instead, President Obama’s people failed
to appreciate something that is now common wisdom among economic
analysts: severe financial crises inflict sustained economic damage, and
it takes a long time to recover. </p>
<p>
This same observation, of course, offers a partial excuse for the
economy’s lingering weakness. And the question we should ask given this
unpleasant reality is what policies would offer the best prospects for
healing the damage. Mr. Obama’s camp argues for an active government
role; his last major economic proposal, the American Jobs Act, would
have tried to accelerate recovery by sustaining public spending and
putting money in the hands of people likely to use it. Republicans, on
the other hand, insist that the path to prosperity involves sharp cuts
in government spending. </p>
<p>
And Republicans are dead wrong. </p>
<p>
The latest devastating demonstration of that wrongness <a title="A pdf" href="http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c1.pdf">comes from the International Monetary Fund</a>,
which has just released its World Economic Outlook, a report combining
short-term prediction with insightful economic analysis. This report is a
grim and disturbing document, telling us that the world economy is
doing significantly worse than expected, with rising risks of global
recession. But the report isn’t just downbeat; it contains a careful
analysis of the reasons things are going so badly. And what this
analysis concludes is that a disproportionate share of the bad news is
coming from countries pursuing the kind of austerity policies
Republicans want to impose on America. </p>
<p>
O.K., it doesn’t say that in so many words. What the report actually
says is: “Activity over the past few years has disappointed more in
economies with more aggressive fiscal consolidation plans.” But that
amounts to the same thing. </p>
<p>
For leading Republicans have very much tied themselves to the view that
slashing spending in a depressed economy — “fiscal consolidation,” in
I.M.F.-speak — is good, not bad, for job creation. Soon after the
midterm elections, the new Republican majority in the House of
Representatives issued a manifesto on economic policy — titled, “Spend
less, owe less, grow the economy” — that called for deep spending cuts
right away and pooh-poohed the whole notion that fiscal consolidation
(yes, it used the same term) might deepen the economy’s slump.
“Non-Keynesian effects,” the manifesto declared, would make everything
all right. </p>
<p>
Well, that turns out not to be remotely true. What the monetary fund
shows is that the countries pursing the biggest spending cuts are also
the countries that have experienced the deepest economic slumps. Indeed,
the evidence suggests that in brushing aside the standard view that
spending cuts hurt the economy in the short run, the G.O.P. got it
exactly wrong. Recent spending cuts appear to have done even more harm
than most analysts — including those at the I.M.F. itself — expected.
</p>
<p>
Which brings us to the question of what form economic policies will take after the election. </p>
<p>
If Mr. Obama wins, he’ll presumably go back to pushing for modest
stimulus, aiming to convert the gradual recovery that seems to be under
way into a more rapid return to full employment. </p>
<p>
Republicans, however, are committed to an economic doctrine that has
proved false, indeed disastrous, in other countries. Nor are they likely
to change their views in the light of experience. After all, facts
haven’t gotten in the way of Republican orthodoxy on any other aspect of
economic policy. The party remains opposed to effective financial
regulation despite the catastrophe of 2008; it remains obsessed with the
dangers of inflation despite years of false alarms. So it’s not likely
to give up its politically convenient views about job creation. </p>
<p>
And here’s the thing: if Mitt Romney wins the election, the G.O.P. will
surely consider its economic ideas vindicated. In other words,
politically good things may be about to happen to very bad ideas. And if
that’s how it plays out, the American people will pay the price.
</p>
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<br clear="all"><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br><br><img src="http://users.moscow.com/waf/WP%20Fox%2001.jpg"><br><br>