The progressive mindset is a curious one, as evidenced by New York Times columnist and Nobel Economics Prize recipient Paul Krugman.
Krugman appeared on MSNBC’s Sept. 23 “The Rachel Maddow Show” and lamented that the Obama Administration missed the opportunity the recent financial crisis offered to fundamentally change how the American economy operates. Host Rachel Maddow asked Krugman what the Great Depression taught economists when it comes to avoiding a repeat.
“It taught us a lot about how to avoid one, which is that you really have to, have to put some constraints. I mean, it sort of roughly, banking is very useful but extremely dangerous and banks have to have all kinds of – you know, fencing put around them as a protection. They have to have some guarantees so that we don’t have bank runs, so people know their money is safe. But then, we also have some regulation so that bankers don’t take huge risks with other people’s money on a ‘heads I win, tails you lose’ basis.”
According to Krugman, some of those lessons have been forgotten.
“We forgot all of that,” Krugman continued. “The short line about how we got on to this crisis is we forgot what our grandfathers learned at great expense. Getting out of – now that we’re in the mess – that’s much harder. I mean, the last time we got out of it with a world war, which is not something we hope to repeat.”
Still, Krugman spoke wistfully of the massive government intervention that World War II facilitated.
“It was an enormous fiscal stimulus,” Krugman said. “It was, you know – we’re getting all worked up about Obama who would be spending at max about 2.5 percent of the gross domestic product. World War II, of course, was more than 40 percent of gross domestic product at its peak. So this is trivial stuff that we’re doing now. Luckily, it’s not confronting a Great Depression.”
Worst of all,
“But I get depressed sometimes about the Depression because the lesson of the Depression seems to be that getting out of this sort of thing requires efforts on the scale that is outside the realm of what’s politically discussible right now,” he said.
The regret: Krugman fears the federal government didn’t adhere to the battle cry of White House Chief of Staff Rahm Emanuel, and let the opportunity to campaign for a government intervention in the private economy “go to waste.”
“You know, the Rahm Emanuel line, ‘Never let a crisis go to waste?’ But you know, it’s starting to look like we did,” Krugman said. “And now, things are not good. Unemployment is high – it’s still rising. But the sense that we have got to act because otherwise the world might end is fading away and that makes it very hard to do stuff.”