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. . . .