End This Depression Now! | Paul Krugman

Summary of: End This Depression Now!
By: Paul Krugman

Introduction

End This Depression Now! by Paul Krugman explores the root causes and consequences of the US recession that began in 2007 and reveals how government intervention and strong fiscal policies can help the nation get back on track. The book summary delves into explanations for the prolonged economic downturn, such as the flawed belief that deregulation and free markets are the best paths to growth and prosperity. Krugman stresses the importance of increasing government spending, thus boosting demand and encouraging economic activity. The introduction highlights the underlying themes of the book and demonstrates Krugman’s thought-provoking analysis of the contemporary economic landscape.

The Devastating Effects of Long-Term Unemployment

The US recession officially ended in June 2009, but millions of people still suffer in the penumbra of formal unemployment. Chronic joblessness devastates household incomes, depletes savings, and leads to hopelessness. Long-term unemployment hurts the economy’s future capacity and damages individual lives by reducing their earnings potential. Today’s job applicants outnumber available jobs four to one, and the United States offers less of a social safety net of unemployment benefits than most countries provide. Unemployment also has political and social costs as it creates an environment in which extremism flourishes. The author argues that the crisis is not hard to solve, and the United States could have a quick, powerful recovery if only the intellectual clarity and political will to act were found.

Restarting the U.S. Economy

America’s leaders possess the power to reactivate the economy and foster job growth by increasing spending on social benefits, state and local aid, and public projects. While businesses face a lack of demand, individuals and companies avoid spending in the absence of reliable earnings. Government, with its vast capacity, fuels the economy by spending money on public projects, state and local aid, and social benefits, which will ultimately lead people to purchase goods and services and provide employment opportunities. The American Recovery and Reinvestment Act was considered massively insufficient. Those who object to more government spending tend to point to the national debt, but the national or global economy is not akin to a family. Families may avoid expenses to shore up their finances. Still, a far-reaching majority doing so in an economy leads all of it to stumble. Injecting cash into the system, tripling the “monetary base since 2008,” didn’t work because of a “liquidity trap” in the US economy, where banks cannot offer credit to consumers at low rates.

The Big Lie of the 2008 Financial Crisis

The commonly touted idea that the 2008 financial crisis was caused solely by the government pressuring lenders to give mortgage loans to unqualified borrowers is a myth. In reality, too much credit was given to all kinds of borrowers in different markets, not just low-income homeowners, and this practice was also observed outside the US. Debunking this myth would undermine the belief that deregulation and free markets are the best paths to growth and prosperity. The megawealthy benefitted the most from these policies, enjoying disproportionately higher income gains than middle and low-income earners. Furthermore, fundamental economic realities were obstructed by politics and intellectual confusion, not by liberal housing agendas.

Income Inequality and Political Polarization

Over the last century, income inequality has been linked to political polarization, preventing political compromise and centrist views from prevailing. Since 1980, politicians have aligned with business interests, cutting taxes and rolling back regulations at the expense of government intervention for economic well-being. This contributed to the notion that depression is the necessary consequence of prior sins and must not be alleviated. Corporate America’s promotion of confidence to replace Keynesian fiscal policies has fueled distrust in government intervention, despite its effectiveness in the past.

Obama’s Fiscal Criticism

The 2009 American Recovery and Reinvestment Act (ARRA) was criticized for being too small to reignite the US economy, despite being a $787 billion stimulus package. Opponents accused it of contributing to a bloated government that spent uncontrollably. However, the spending largely funded emergency aid like unemployment insurance and food stamps, not an expansion of government power. Most allocations helped individuals and local governments and paid for tax cuts; a smaller portion went to infrastructure spending. The bill had enough to stem the recession, but not much effect on the economy by generating about $45 trillion in production.

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