Paul Krugman pleads with us today. Things are that great. Don't overreact to the projections of a healthier economy.
I worry that policy makers will look at a few favorable economic indicators, decide that they no longer need to promote recovery, and take steps that send us sliding right back to the bottom.
So, about that good news: various economic indicators, ranging from relatively good holiday sales to new claims for unemployment insurance (which have finally fallen below 400,000 a week), suggest that the great post-bubble retrenchment may finally be ending.
We’re not talking Morning in America here.
I'd just as soon outlaw that "morning in America" stuff, anyway. It reminds me of that skeletal figure of Ronald Reagan with his scythe cutting through the middle class, unions, and all that remained of a decent, stable and progressive in America in the early '80's. Waking up to Reagan's "morning" was like waking up to a sky where the sun was suddenly stuck in one position, bathing the nation in a grim Hollywood klieg light, not the life-giving light we needed to grow normally.
Let's face it. Washington hasn't changed since then. It's certainly not giving off much life-giving light these days, either.
Realistically, the best we can hope for from fiscal policy is that Washington doesn’t actively undermine the recovery. Beware, in particular, the Ides of March: by then, the federal government will probably have hit its debt limit and the G.O.P. will try to force President Obama into economically harmful spending cuts.
I’m also worried about monetary policy. Two months ago, the Federal Reserve announced a new plan to promote job growth by buying long-term bonds; at the time, many observers believed that the initial $600 billion purchase was only the beginning of the story. But now it looks like the end, partly because Republicans are trying to bully the Fed into pulling back, but also because a run of slightly better economic news provides an excuse to do nothing.
There’s even a significant chance that the Fed will raise interest rates later this year — or at least that’s what the futures market seems to think. Doing so in the face of high unemployment and minimal inflation would be crazy, but that doesn’t mean it won’t happen.
