How to Create an Economic Downfall

By quoting Carmen Reinhart, senior fellow at the Peterson Institute for International Economics and co-author of "This Time Is Different," a history of debt crises, the NYT demonstrated how accepted economists miss the significant and escape scrutiny by a simple recognition of their mishaps.

 

"We sure missed a big window of opportunity to reduce our debt in those strong years when asset prices were booming. Instead, we're stuck trying to do it now, when the economy is so weak."

 

The article's statement by Torsten Slok, chief international economist at Deutsche Bank, clarified the lack of depth in economic textbooks and indicated that economists read the wrong texts.

 

"It's difficult to find a textbook to tell you what should you do now."

 

America 's national newspaper balanced its commentary with the usual unproven and non-scientific assertions:

 

"The Republican authors of the debt ceiling deal say that cutting the size of government will increase economic growth down the road because federal borrowing soaks up money otherwise available to private businesses and federal spending distributes that money inefficiently.

 

"Some conservative economists argue that even the immediate impact of a deal could be positive. Classic economic theory holds that people respond to the growth of government by spending less of their own money, because they assume that taxes will increase. A reduction in the federal debt therefore should encourage people to spend more of their money.

 

'"From an accounting point of view, it seems obvious that you would reduce G.D.P. if you cut government spending," said Randall Kroszner, an economics professor at the University of Chicago and a former Fed governor appointed by Mr. Bush. '"But the key is really the impact on consumption and investment. If you reduce government spending and if people think that reduces uncertainty about the tax burden down the line, they may be more comfortable with spending."'

 

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