In the face of sovereign debt worries making waves in global financial markets and an extraordinarily imbalanced budget (recognized even by the folks at Moody's, who have a bit of a tendency to underestimate risk) from President Obama, Paul Krugman suggests that the current fear-mongering over the US budget is reminiscent of "the groupthink that took hold during the run-up to the Iraq war." His carefully-considered opinion is that the government should focus on tackling that which, based on recent writings, he regards to be the greatest dilemma of the current recession--unemployment.
Despite Krugman's dismissal of budget concerns, given the insanely high projected debt-to-GDP ratio, the government should ABSOLUTELY be focusing on the matter. Nonetheless Krugman is right that unemployment has significant short- and long-term consequences as well. So perhaps our policymakers can act like economists, make a bit of a trade-off, and try to deal with both problems at the same time. There's no reason to focus entirely on problem X, unemployment, while ignoring problem Y, the deficit. Of course, the remedies for one could hinder progress toward solving the other. Then again, that's a challenge macroeconomists and policymakers must always face. There is no reason for them to shirk now, when it is critical that we deal with both issues.
No comments:
Post a Comment