Tuesday, December 11, 2012

Even Those Facing The "Cliff" Not Necessarily Facing Its Meaning

Krugman on what the "fiscal cliff" means to the Very Serious People in "Heritage, Chicago, and the Fiscal Cliff":
"So if you think the fiscal cliff matters, you also, whether you know it or not, believe that a whole school of macroeconomics responded to the greatest economic crisis since the Great Depression with ludicrous conceptual errors, of a kind nobody has had a right to make since 1936 at the latest."
What's the nature of the problem in the "fiscal cliff"? Spending cuts while the economy is weak hurt the economy. One would think that a hard reality to swallow for the folks buying the Chicago notion that public spending cuts will somehow mystically always be replaced by an equal amount of increased private investment no matter what the state of the economy.

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