Hoovernomics Explains the Economy

This one chart tells you much of what you need to know about the fiscal side of the US economy: we’re dealing with a recession/depression Herbert Hoover style — by cutting government spending just when we would have needed a strong counter-cyclical push from government.

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What’s good about this chart, lifted from Krugman, is that it aggregates federal, state, and local spending; everyone’s cutting.

Something to consider as you look at the ugly budget deal coming out of Congress — the one that doesn’t extend unemployment benefits and, as far as I can tell, doesn’t fix the recent vicious cuts to food stamps either. (Please correct me if I’m wrong about that.)

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6 Responses to Hoovernomics Explains the Economy

  1. Kevin Hayden says:

    Amazing. After the USSR collapsed and accrued savings due to military budget cuts and we had a surplus budget for the first time in years…. now we’re spending less than that, with terrible unemployment and a rotted infrastructure.

    Yet I can’t believe the government economists really believed Keynesian economics wouldn’t work. So were they just lying? Or were they really that incompetent?

    • Who are these “government economists” of which you speak? The Fed mostly argued for fiscal stimulus and when it didn’t get it took on the ‘qualitative easing’.

      The Obama people never called for nearly enough stimulus, but this seems to have been mostly a political calculation about what Congress would swallow. I thought then and think now it was a mistake to surrender preemptively, but they didn’t want to look defeated. The problem has been the Congressional — especially House — GOP (and the now-mostly-vanished Blue Dog ‘Democrats’).

  2. Kevin Hayden says:

    I meant economic advisers, and included the Fed in that. I may be wrong about the Fed but was under the impression they agreed that under-stimulation was okay, to the point of austerity.

    While I’m aware of the political calculations necessary within a polarized system, it has long been Obama’s approach to begin negotiations too far to the right. Only recently has he shown a little better strategy than that.

    • John says:

      No, the Federal Reserve publications have said for years that austerity is a drag on the economy and has been telling congress not to do it for years whenever Ben gets hauled before congress.

  3. donna says:

    For common people like me, that graph is not a good report. Seeing it could mean recession for many years and it’s not good.

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