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2 Apr, 5 tweets, 1 min read
Morning in America! 1/ nyti.ms/31GfoI5
Still a long way to go, but full employment by early next year — and maybe some temporary overheating — now looking very plausible. Why so different from the sluggish recovery after 2008? 2/
I and others were predicting a V-shaped recovery this time because the pandemic shock, unlike the deleveraging shock of 2008, didn't leave a large overhang of impediments to recovery 3/ bcf.princeton.edu/events/paul-kr…
But it's also true that monetary and especially fiscal support for recovery has been much stronger than under the underpowered Obama stimulus 4/
I'm worried, as we all should be, about rising infections as people get careless. But if vaccinations bring the pandemic under control, still the most likely case, we're going to be feeling pretty happy by New Year 5/

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More from @paulkrugman

Paul Krugman Profile picture
1 Apr
Having a bit of fun delving into the history of infrastructure spending. Q: how big a deal was the Erie Canal? It cost $7 million, which sounds trivial. 1/
But the US economy was vastly smaller then than it is now, and prices were much lower. This may have been almost 1% of a year's GDP, the equivalent of ~$200 billion today 2/ measuringworth.com/datasets/usgdp…
And this was a state, not a national project. As a share of New York's GDP, it was probably the equivalent of a national project > $1 trillion today 3/
Read 4 tweets
Paul Krugman Profile picture
1 Apr
This attack might have a smidgen of credibility if the Trump tax cut had actually caused corporations to bring money back to America and invest more 1/ msn.com/en-gb/news/wor…
But it didn't. 2/ cfr.org/blog/trump-tax…
As a result, Trump's tax cut was basically a giveaway to stockholders — and foreigners own 40 percent of US equities 3/ taxpolicycenter.org/taxvox/who-own…
Read 5 tweets
Paul Krugman Profile picture
31 Mar
Agree with just about everything here. This looks like a solid plan, with almost everything justified; but it should be only part of building back better — the really high-return public investments are probably in people, especially children 1/
Also very much agree that the case for a full pay-for via taxes is weak, given extremely low real interest rates, which are a triple reason to spend: we can afford it, private sector doesn't see high returns, and it means that we need to worry about secular stagnation 2/
Real interest rate over time (using previous 3-year core inflation) 3/
Read 7 tweets
Paul Krugman Profile picture
29 Mar
This is preliminary, and probably being floated in part to get reactions. But for what it's worth, it sounds as if the Biden plan will be too deficit-averse 1/ washingtonpost.com/us-policy/2021…
The stimulus from the American Rescue Plan will be largely in the rear-view mirror by the time infrastructure ramps up; we'll probably be back in an environment of weak demand and low interest rates 2/
Under those conditions sustained deficit spending on investment is actually good — which was the case Larry Summers was ably making before he began his crusade against the ARP 3/
Read 5 tweets
Paul Krugman Profile picture
24 Mar
What is Yellen talking about here? Look at the data 1/
Was there any break in the trend in business investment after a very large tax at end 2017? No 2/
Real nonresidential fixed investment ex mining (which is noisy because of oil price/fracking stuff) 3/
Read 4 tweets
Paul Krugman Profile picture
24 Mar
So actually I think Noah, unusually, has this mostly wrong. These macro wars are very different from those of 2011; the debates are about numbers, not principles — basically because the big conceptual issues were settled when one side won 1/ noahpinion.substack.com/p/the-return-o…
This time we really are all Keynesians now — or at any rate nobody is listening to the people who insisted austerity is expansionary, all unemployment is structural, etc. Summers, Blanchard, Yellen and yours truly are working in pretty much the same framework 2/
And that framework is IS-LM-ish macro, where deficit spending is expansionary at a given interest rate. The question is how expansionary. And that's a subject for dispute mainly because we are in uncharted policy territory 3/
Read 6 tweets

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