Krugman praises government's role in recovery

Paul Krugman has been a critic of the economic recovery efforts, his main point being that the stimulus spending was not big enough. Now, with the latest economic indicators pointing in a positive direction, he still says he would have made it bigger; but he's also praising the government for what it did do.

And in doing so, he's taking a swipe at the Republicans who claim that it did too much.

In a New York Times column today, "Averting the Worst," he says:

So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. . . . And the job market still hasn’t turned around . . . for now, all we have to celebrate are indications that things are getting worse more slowly.

For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.

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So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

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The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed. And that’s another reason we’re not living through Great Depression II. . . .

From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan — a number that will grow over time — and that the stimulus has played a significant role in pulling the economy out of its free fall.

All in all, then, the government has played a crucial stabilizing role in this economic crisis.

Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.

And aren’t you glad that right now the government is being run by people who don’t hate government?

Yes, indeed.

Ralph