Sometimes You Have to Say: "What the Fuck!"

Krugman blogs:

The WSJ’s economics blog has an interesting piece about how failing to extend unemployment benefits may actually end up increasing the deficit in the longer run, by pushing marginal older workers into disability. But this is actually a much broader point. There’s a quite good case to be made that austerity in the face of a depressed economy is, literally, a false economy -- that it actually makes long-run budget problems worse.

People like me have been hesitant to make this argument loudly, for fear of being cast as the left equivalent of Arthur Laffer -- but the heck with it, I’m going to lay it out.

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In short, there’s a very good case to be made that austerity now isn’t just a bad idea because of its impact on the economy and the unemployed; it may well fail even at the task of helping the budget balance.

It’s important to realize that I’m not saying that government spending always pays for itself, and that saving money is always counterproductive. These kinds of effects are specific to a liquidity trap situation. But that’s the situation we’re in.