USA: Boost the economy! Germany: Get real! (Who’s right?)

David Brooks in today’s NYT:

During the first half of this year, German and American political leaders engaged in an epic debate. American leaders argued that the economic crisis was so bad, governments should borrow billions to stimulate growth. German leaders argued that a little short-term stimulus was sensible, but anything more was near-sighted. What was needed was not more debt, but measures to balance budgets and restore confidence.

The debate got pointed. American economists accused German policy makers of risking a long depression. The German finance minister, Wolfgang Schäuble, countered, “Governments should not become addicted to borrowing as a quick fix to stimulate demand.”

According the Brooks, the early returns show that Germany was right. Its economy is buzzing; ours is sputtering. He acknowledges that “Results from one quarter do not settle the stimulus/austerity debate. Many other factors are in play.” But, he goes on, “the results do underline one essential truth: Stimulus size is not the key factor in determining how quickly a country emerges from recession. The U.S. tried big, but is emerging slowly. The Germans tried small, and are recovering nicely.”

Note: Paul Krugman would counter that the US stimulus wasn’t big enough. . . .

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2 Responses to USA: Boost the economy! Germany: Get real! (Who’s right?)

  1. Ray Harris says:

    I vote for Krugman with qualifications. As a matter of policy and sanity, IMPO. we need to pour massive resources into alternate energy, electric cars, electric trains, wind energy, solar, reverse electric meters that allow us to put our home turbine electricity back into the grid. Imagine a home windmill that looks like a jet engine with a rudder that keeps it turned into the wind. Designer models could become prestige lawn ornaments overnight.

    Rebuilding the grid could be a major work project in itself. The new grid should be in underground tunnels that are impervious to the weather. For maxmum efficiency, they should also use state-of-the-art super-cooled insulated cables to distribute the power. The highspeed trains can be built on the same right-of-way that the new grid occupies.

    • Ray,

      Have you read James Howard Kunstler’s stuff? He’s a fan of revitalizing the railroads, though he’s not big on super-fast trains. As for the highways and related “Happy Motoring” (i.e., solitary transport) projects, he’s very negative. Kunstler believes we’ve got to change our way of life, away from extravagance and Big Is Better, and towards simplicity, local-grown, and Less Is Sustainable. I’m pretty sure he’s right.

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