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Paul Krugman: We Could End This Depression Right Now

The Nobel laureate talks about Washington, Europe and the bizarre alternate universe inhabited by deficit fear-mongering media and political elites.

The central message of Paul Krugman's new book, End This Depression Now!  is simple: It doesn't have to be like this. No external dynamic is keeping unemployment at more than 8 percent and consigning a generation of young workers to an economy in which risk is plentiful and opportunities scarce. It is only a failure of political will -- and an almost universal embrace of conservative voodoo economics – that is keeping us mired in this dark economic moment.

Of the 2009 stimulus, Krugman writes, “Those who had more or less the right ideas about what the economy needed, including President Obama, were timid, never willing either to acknowledge just how much action was required or to admit later on that what they did in the first round was inadequate.” Instead of treating the dismal jobs picture as a crisis requiring their full attention, Washington “pivoted” to talking about the deficit – a phantom menace -- at precisely the wrong time. “People with the wrong ideas,” Krugman writes, “were vehement and untroubled by self-doubt.”

This week, Paul Krugman appeared on the AlterNet Radio Hour to discuss his book. Below is a lightly edited transcript of the conversation (you can listen to the entire show  here):

Joshua Holland: Let me ask you first about a somewhat provocative word in your title, the D-word. What makes this a depression rather than a so-called “Great Recession” that we’ve heard so much about?

Paul Krugman: A recession is when things are going down, when the economy is heading down. A depression is when the economy is down, and stays down for a long time. We have the Great Depression, which was more than a decade. There were two recessions in there and there were two periods that were recoveries in the sense that things were getting better, but not much better. The whole period was a period that was really terrible for America and for the world. We’re in a period like that right now. Not as bad as the Great Depression, but that’s not much to recommend it. It’s a sustained thing. We’re now in year five of very high unemployment with terrible prospects for young people. It’s a depression.

JH: I wonder if it’s similar to the so-called Long Depression in the late 19th century. It was kind of two recessions sandwiched around a period of growth. The reason I ask that is because median wages really did not recover after the so-called tech bubble burst in 2000 before we hit this crash. Isn’t that right?

PK: There is an argument that even the so-called “Bush boom” – that period of the middle years of the last decade – was still not very good for most Americans. There is that, but clearly things got an order of magnitude worse after 2007. That’s mostly what I’m focusing on in End This Depression Now.

JH: I want to encourage people to read the book, but can you just give readers a sense of what you think is the most important thing policy makers should be thinking about doing right now?

PK: The moral of the book is: this doesn’t have to be happening. This is essentially a technical process; it’s a small thing. It’s like having a dead battery in a car, and while there may be a lot wrong with the car, you can get the car going remarkably easily, if you’re willing to accept that’s what the problem really is.

First and foremost, what we have is an economy that just doesn’t have enough spending. Consumers are hobbled by debt, corporations don’t want to spend if they don’t see consumer demand. Somebody has to step in and spend, and that somebody is the government. The government could – and by all means let’s talk about forward-looking, big projects -- right away get a big boost in the economy just by reversing the big cutbacks that have taken place in state and local governments these past three years. Get the schoolteachers rehired and get the policemen and firefighters back on the beat. Fill those potholes that have been developing in New Jersey and I believe all over America. We’d then be most of the way back to a decent economy again.

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