In a recent New York Times article, Paul Krugman sees Europe and America channeling Herbert Hoover:
As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.
And he thinks the result will be a prolonged and historic economic depression brought on by an anal and conservative austerity ethos:
I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.
But you can’t have Roosevelt without a Roosevelt supporting Congress (which we definitely ain’t got, and are not going to have anytime soon). Over the next several years we’ll see if Paul Krugman proves to be a Chicken Little, or if he’s right.