The US economy is rapidly improving. Growth picked up sharply last year, employment is rising rapidly and unemployment has fallen further.
This has happened while public spending is slashed. On this basis, one of the world’s most famous economists attacked another very famous and prolific economist.
Professor Jeffrey D. Sachs accusations Nobel laureate Paul Krugman for printing a bad medicine for the US economy and to be a bad fortune teller.
– I think Krugman has exaggerated the benefits of large budget deficits sharply. I’ve never really understood why he has done this. Both historical experience and the theoretical basis is much weaker than what he has said publicly repeatedly said Sachs Aftenposten under management company Skagen recent New Year conference in Oslo.
Requesting explanation
Sachs calls Krugman’s message “a gross simplification.” Krugman has long argued that the reduction in the US budget deficit has led to persistent high unemployment. He has been responsible for keeping deficits large to keep up the pace of the economy.
Sachs therefore challenge Krugman to explain last year’s recovery in the US economy.– He has still not done. He continues to say that the only way forward is to have high government budget deficits. We have now had fiscal tightening, a robust reduction in unemployment and pretty good growth. I’m still waiting for Krugman’s explanation, says Sachs.
The short shadows
Sachs believes Krugman argument for short-term stimulus has a hidden cost in that it has obscured what is really important.
– The US has not had a proper discussion about a new energy, a new transportation system or modernization of infrastructure. Everything in Krugman has been about jobs and demand in the short term. Nothing has revolved around the country’s long-term needs, says Sachs.
Will be long-term
Sachs will therefore shift the debate and policy over the need for greater public sector with higher public investment. He says in an extension of this that it is not desirable to build up huge public debt.
– Krugman says the debt does not mean anything because interest rates are so low. I say that it means something when interest rates are going up again, something will happen. When interest expenses will take a large portion of the state budget expenditures, says Sachs.the Social from USA
Sachs will move America in what he calls a “social democratic direction.”
– We need to increase government revenues from around 30 percent of total production and increase the share by several percentage points. But it does not happen. We have a more limited government than ever and we have a small state. This is the great disappointment by the Obama administration. The public sector is not strengthened, it is reduced, says Sachs.
He points out that President Barack Obama had “substantial majority” in both the Senate and the House of Representatives when he was president.
– But he spent majorities to current stimulation of the economy, not to structural and strategic investments, says Sachs.
Read also:
Published:
No comments:
Post a Comment