Economics @ ITT

The President Surrenders on Debt Ceiling

Posted in economics, Keynesian Economics, macroeconomics, Policy Issues by ittecon on August 2, 2011

Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

via The President Surrenders on Debt Ceiling – NYTimes.com.

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