NATION A3

NATION A3 MAY 9, 2012

Nobel Laureate Economist Doesn’t Accept Slow Recovery JEFF ZELEVANSKY/GETTY IMAGES

BY GARY FEUERBERG EPOCH TIMES STAFF WASHINGTON—American economist and New York Times columnist Paul R. Krugman is impatient at the snail’s pace of America’s economic recovery. He thinks we have become far too complacent in accepting a low GDP and high unemployment as the new norm. Krugman, 59, says that if politics can be set aside, we can dramatically accelerate a full recovery. The Nobel Prize-winning economist spoke May 2 at the Economic Policy Institute (EPI) to discuss his latest book, “End This Depression Now!” Although the “Great Recession” officially ended four years ago, GDP and employment are still below normal. There has been some improvement in unemployment since it peaked at 10 percent in October 2009, but gains have been slight—the latest reports show an 8.1 percent unemployment rate, or 12.5 million people. When the underemployed— those who want full-time work, but have to settle for part-time jobs—are folded in, there are about 24 million or 15 percent of the workforce, which is roughly double the number before the crisis, Kruger writes. The number of very long-term unemployed—out of work for more than one year—is now 3.9 million, Krugman said at the EPI. Compare this to only 700

tion for state and local goods and services, rehired the people previously let go, and began renewing road repair projects and similar programs, 1.3 million workers would be back on the job—nearly enough to bring unemployment below 7 percent. Krugman says it’s technically not difficult to do, but in today’s polarized environment, politically, it is a real challenge.

Princeton professor and New York Times columnist Paul Krugman smiles after being awarded the Nobel Prize in Economics in 2008. thousand before the crisis began in 2007. And this still does not include those who have been “driven out of the labor force” because they bear a stigma that renders them unemployable. Even recent college graduates are not insulated from the crisis: Approximately one in four is unemployed or working only part-time. Krugman contrasts current experiences with those of America’s unemployed just before the crisis. He says that back then, less than 20 percent of unemployed remained so for six months; less

than 10 percent had been out of work for a year or more. The long-term unemployment that many in the country now face hasn’t been seen since the Great Depression. It is ruining lives; it “breeds anxiety and psychological depression,” writes Krugman, but there is still hope. “We have both the knowledge and tools to end this suffering,” writes Krugman. There have been signs of improvement, but the current pace of recovery suggests it will still be a long time before we’re back to full employment. “I haven’t JOHN MOORE/GETTY IMAGES

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seen any plausible estimate that puts the time of recovery at less than five years, and something more like seven years is probably a better number,” says Krugman in his book. While others have labeled it a recession, Krugman calls our current economic slump a “depression.” To be sure, it’s not the Great Depression, at least not in the United States. In Greece, Ireland, and Spain, however, with unemployment around 23 percent, they might regard it as such. While we may be doing better than many in Europe, there are still very real problems and concerns. When “stuff is down” for more than five years, the economy stabilized but real GDP impeded, and no full recovery on the horizon, Krugman says we should acknowledge that we are in a depression. But according to Krugman, it doesn’t have to be this way. He says that we should have bounced back to normal growth by now. Krugman cited the Congressional Budget Office (CBO) estimate of “potential” GDP and concludes that the U.S. economy is producing a trillion dollars less of value each year than it could be producing. Krugman said that if we went back to normal levels of produc-

‘Not Enough Demand’ According to Krugman, “there is a lot of genuine confusion” on the current economic crisis. He says our economy has high unemployment and low economic output because consumers, businesses, and government are not spending enough. When the housing bubble burst, business investment declined and government spending shrank. Businesses weren’t about to invest in new capacity to produce goods that wouldn’t be bought. In other words, we are suffering from “an inadequate level of demand,” he said. Krugman has drawn a chapter from economist John Maynard Keynes, whose views on government stimulus were immensely popular following World War II, but whose policy recommendations were actually institutionalized earlier, during the Depression, according to economist Raghuram Rajan. Keynes provided much of the analytical framework to understand depressions, said Krugman. Our predicament bears a strong resemblance to conditions in the 1930s, and we should have learned from the research and analysis what to do in our current situation, he said. “Now is the time for the government to spend more, not less, until the private sector is ready to carry the economy forward again,” Krugman writes. The time for austerity measures is during the boom, not the slump, according to Keynes. Austerity policies, which are what we have been following since early 2010, shrink the economy and destroy jobs, said Krugman at EPI.

The proponents of austerity measures, says Krugman, say austerity breeds “confidence,” believing that this will somehow lead to more spending and economic recovery. But Krugman said this austerity theory is not supported by facts. He cited data that plotted the size of austerity measures in European nations against the growth in GDP. The result is a “tight” inverse relationship, he said. The austerity hypothesis is now being tested in Europe, in nations like Greece, Ireland, Spain, Italy, and the UK. British Chancellor George Osborne in the Conservative government warned against abandoning austerity recently. He said that gains for more public spending and lower taxes would be offset by higher interest rates, and investors would insist upon purchasing government bonds, according to the Guardian last month. But this scenario is rejected by Krugman, who said that our national debt relative to our GDP is still below past levels. He agrees the high debt is not good but “it is not a crisis issue.” Despite our growing debt, markets are willing to lend our government longterm loans at low interest rates, Krugman said. Rajan questions the efficacy of government stimulus in practice. Politicians typically bring out all their pet projects under the guise of stimulus to support a recovery, he says in “Fault Lines” (2010). As payback to special interests, there is little incentive to sign off on projects that will actually aid the recovery. Krugman says there is little to be gained by focusing on the excesses of the boom, the bad lending, and what foolish people did during the boom years. Many people want to blame the financial sector with its financial inventions, such as credit default swaps, for our troubles. Krugman agreed that from September 2008 to March 2009, financial markets were disrupted, “but that’s long gone.” “That should tell you that the financial sector is not the reason we are not having a strong recovery,” he said.

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People stage a demonstration outside the Bank of America tower on May 8, in New York City. Community, labor, and clergy leaders gathered to protest Bank of America’s “predatory pursuit of profits,” by foreclosing on millions of homes throughout the United States.

NATION IN BRIEF George Soros Gives $2 Million to ProDemocratic Groups Billionaire George Soros is pledging $2 million to two liberal groups who are fighting to get President Barack Obama reelected, according to The Associated Press. Soros, who is estimated to be worth around $20 billion, donated $1 million to America Votes and $1 million to super PAC American Bridge 21st Century. “As he has in the past, George is focusing his political giving in 2012 on grassroots organizing and holding conservatives accountable for the flawed policies they promote,” wrote Soros’s political adviser Michael Vachon in an email obtained by The Washington Post. “Both groups are part of a progressive infrastructure, or center left establishment, that plays an increasingly important role in elections,” he added. Soros was one of the top contributors to Democrats during the 2004 presidential election, donating around $23 million to pro-Democratic groups. The New York Times reports that Soros’s gifts are part of a larger attempt for a pro-Democratic focus on grassroots organizing rather than competing with conservative groups for advertising.

Top High Schools in the US Ranked The best high schools in America were ranked by US News & World Report on Tuesday. The authors evaluated nearly 22,000 public high schools around the country and issued gold, silver, or bronze medals, using state proficiency scores, how well schools prepared students for college, and other metrics to determine a school’s ranking. “Sending your child to a top high school can ease that transition into the adult world. Often, students who graduate from a great high school do so with college credits, scholarship money, and marketable skills,” the report said. The top high schools in the nation are: School for the Talented and Gifted—Dallas, Texas Thomas Jefferson High School for Science and Technology—Alexandria, Va. School of Science and Engineering Magnet—Dallas, Texas University High School—Tucson, Ariz. International Academy—Bloomfield Hills, Mich. Oxford Academy—Cypress, Calif. Pacific Collegiate School—Santa Cruz, Calif. International School—Bellevue, Wash. High Technology High School—Lincroft, N.J.

Santorum Endorses Romney in Email Former presidential candidate Rick Santorum formally endorsed Mitt Romney for president in a late-night email. “The primary campaign certainly made it clear that Gov. Romney and I have some differences. But there are many significant areas in which we agree,” he said. Santorum, a former Republican senator from Pennsylvania, said that Romney’s former rivals would line up to back him in his election bid. “We both agree that President Obama must be defeated. The task will not be easy. It will require all hands on deck if our nominee is to be victorious,” Santorum wrote in the email. “Gov. Romney will be that nominee and he has my endorsement and support to win this the most critical election of our lifetime,” he added. Former House Speaker Newt Gingrich, who ended his campaign last Wednesday, offered a muted endorsement for Romney during a press conference. Santorum did not elaborate on whether he would help campaign for Romney or be his vice president.

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