I am an admirer of economist Paul Krugman.
Not only is he a Nobel Prize winner, but he is also a good writer capable of making complex theories comprehensible for ordinary folks. His latest column for the New York Times is a good example.
His premise in the column is that big government prevented the recession, as bad as it is, from becoming a depression.
He doesn't pull any punches. He admits, as Peter Finch said in his "I'm as mad as hell" speech in the movie "Network," that "we know things are bad — worse than bad."
Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you take into account the need to find employment for a growing working–age population, we're probably around nine million jobs short of where we should be.
As one of the unemployed, I can attest to the roller coaster ride out–of–work people go through on a daily basis. You get up in the morning, feeling the hope that comes with the dawn of a new day, but you get gradually beaten down as the day progresses. By the time night arrives, you crawl into bed with your tail between your legs and hope to get the rest you need to muster more enthusiasm for the next day, which is also likely to be a downer.
That is, if fear and anxiety don't invade your dreams and keep you from getting the rest you crave.
It was hard to share in the optimism of some Democrats last week, when word came out that the unemployment rate had fallen by 0.1% in July.
But Krugman wasn't drinking the Kool–Aid. Well, not entirely.
And the job market still hasn't turned around — that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven't yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.
I have written, in recent days, of my frustration with Barack Obama for breaking his campaign promise to offer tax credits to companies that hired Americans this year and next year. I believed, before he took office, that the emphasis needed to be on job creation, but I have seen precious little of that, in spite of some big talk from lawmakers when the stimulus package was passed and then signed.
Krugman himself has argued that the stimulus package was too small. But he, like many of his colleagues at the Times, has been an enthusiastic cheerleader for the Obama administration. And today, he praises what government did to put the brakes to the freefall.
A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators — world trade, world industrial production, even stock prices — were falling as fast as or faster than they did in 1929–30.
But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.
So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.
He praises the " 'automatic' stabilizing effect" federal spending has had, along with government's efforts to "rescue the financial sector."
You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it's possible to be dissatisfied, even angry, about the way the financial bailouts have worked while acknowledging that without these bailouts things would have been much worse.
The point is that this time, unlike in the 1930s, the government didn't take a hands–off attitude while much of the banking system collapsed. And that's another reason we're not living through Great Depression II.
And he praises the government's efforts to pump up the economy.
All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.
And aren't you glad that right now the government is being run by people who don't hate government?
Yes, frankly, I am.
And I am glad, as I usually am, that Krugman is there to remind me that things are getting better. Incrementally, perhaps. And that light at the end of the tunnel may be merely a speck in the distance right now. But at least it is there. And it seems to be on track to get larger.
But there are still problems. Unemployment benefits are going to run out for many people before long. I understand why Obama urges people to be patient. Will their patience last longer than their money does?
I'm still very worried about the economy. There's still, I fear, a substantial chance that unemployment will remain high for a very long time. But we appear to have averted the worst: utter catastrophe no longer seems likely.
And Big Government, run by people who understand its virtues, is the reason why.
I'll try to keep that in mind while I try to keep the night terrors at bay.