The U.S. economy isn't doing well--unemployment is over eight percent--but the recovery is going better than it would have without government stimulus. In fact, while Paul Krugman says the recession "coulda been worse," he advocates more government spending.
"We should have done even better: if stimulus works, and the evidence says that it does, we should have done more, and made the slump even shorter and shallower," he said.
He cites an analysis done by Josh Lehner, an economist for the state of Oregon. Lehner compared the U.S. financial crisis and the recession that followed to five similar post-World War II international crises, as well as the Great Depression.
The crisis that began in 2008 after the housing and bank collapse looked similar to the early years of the Great Depression. Job losses stopped plummeting by 2010, while they continued to freefall during the Great Depression for nearly four years, resulting in an unemployment rate of nearly 25 percent.
In contrast, the unemployment rate for the latest crisis topped out at ten percent in October of 2009 and has been dropping steadily ever since. Housing prices and consumer confidence are also up.
The current recession also compares favorably to crises in Spain in 1977, Norway in 1987, Finland in 1991, Sweden in 1991, and Japan in 1992.
Spain took 13 years to recover the jobs it lost, while Finland and Sweden took more than 17 years each, and Japan still hasn't recovered. Norway took eight and a half years, but its unemployment rate tripled during that time.
Four years into the Great Recession, the United States has already regained half the jobs it lost, and is on track to break even in a few years. Every other country lost a greater percentage of national employment during its crisis than the U.S., except for Japan.
Krugman claimed Japan's use of stimulus kept it from the brunt of itscrisis, but blames its slow recovery on other mistakes.
"I think you can make a good case that Japan was highly effective in its use of fiscal stimulus to limit the damage from financial crisis; where it failed was in not pursuing expansionary monetary policy during the good years to lift itself out of deflation," said Krugman.
The U.S. Treasury Department made a good case for the TARP spending bill earlier this year (below).
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