IS ANYONE IN CONGRESS LISTENING?

NYT editorial by economist Paul Krugman provides clairty in a time of economic uncertainty

Washington, D.C.--  The new unemployment figures came out just before the July 4th holiday and they are ugly. We lost 125,000 jobs and the unemployment rate is 9.5%.

But instead of helping those who are out of work, Congress just went on vacation without extending unemployment benefits. That means 2 million Americans are losing a desperately-needed source of support because of Congress' continued failure to act.

Congress seems to think they're doing the popular thing by pulling back support for the economy, but in fact, a recent poll shows that the overwhelming majority of Americans want benefits extended, even if it means temporarily increasing the deficit.

Thankfully, our New York senators, Schumer and Gillibrand did the right thing and voted to extend benefits. But there weren't enough senators willing to stand with them.

The recent unemployment numbers drive home the point that Nobel Prize-winning economist Paul Krugman made last week in a NYT editorial about the perils of government inaction. He goes so far as to say we may be heading for a depression. This is one more example of when Congress puts politics before policy-- we all suffer the consequences. But unfortunately, it disproportionately affects the poor and working poor even harder.

Krugman said, in no uncertain terms:

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost—to the world economy and, above all, to the millions of lives blighted by the absence of jobs—will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world...governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

Unemployment—especially long-term unemployment—remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly.

In the face of this grim picture, you might have expected policy makers to realize that they haven't yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

While long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don't think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

You can read the whole thing and pass it on to your friends here. 

(Above image of economist Paul Krugman created by Alain Roche)