Tuesday, October 26, 2010

Mr. Paul Krugman and British Economic Policy

Mr. Paul Krugman, in his column in The New York Times, criticized the recently adopted policies of the British government. Mr. Krugman argues that cutting deficits during difficult economic times is not good policy. This is an argument that many economists make.

I can understand their line of reasoning. The problem though, as I see it, is that politicians and governments rarely, if ever, follow through with deficit reduction policies when economic times are better. Cutting spending, increasing taxes, reducing fat, and taking the more harsh measures that are required to reduce deficits is difficult to do when times are good. What politician wants to take away the punch bowl and spoil the party when times are good?

Economists may be right in their opinions about deficit reduction during economic distress; but human nature, self-interest, and greed works against them. You cannot have it both ways; either you cut deficits when times are good, or you cut them when times are bad. Humans sometimes need to actually experience pain before they do something about it. Recessions and economic slowdowns are the pain that wakes people up.

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