Dr. Krugman is correct about a number of things. First, demand is sluggish. Unemployment is still too high as evidenced by the 1 million people who applied for 50,000 new jobs at Mc Donald's in April 2011. Unemployment amongst the young and recent college graduates is still unacceptably high. The debt of the United States is excessive although it must be judged in relation to the huge size of the economy.
Dr. Krugman believes that the stimulus is still not large enough to do the job of bringing the economy back to full employment. Back in 2008, Warren Buffet pointed to the upcoming year as the period for clearing out surplus housing inventories so that new construction can begin in earnest.
Despite all of the misery at the lower rung of the economic ladder, Dr. Krugman shows how the top 1% managed to increase their incomes by a factor of 5 over the previous 50 years. There is heavy criticism in the book of Wall Street excesses which lead to the crash. These excesses can be addressed by requiring margins for derivatives and amending the Uniform Commercial Code to set forth the rights, duties, obligations and recourse of the counterparties to derivative transactions.
A strength of the book is that the author quite correctly pinpoints the things which lead to the current slow growth scenario. The presentation could be supplemented in other areas. For instance, more government stimulus could be provided to small business. In addition, more revenues could be raised with excess consumption taxes on things like junk food which cause medical expenses to balloon in programs like Medicaid.
The top 1% should pay more taxes on excess consumption. The United States consumes a disproportionate amount of the world's resources and this imbalance needs to be redirected to achieve economic growth through goods and services that are truly needed.
Although fewer people can afford newer cars and homes, things can be done to change this inequity. For instance micro-cooperatives are blossoming in areas of NYC. These apartments are approximately 250-350 square feet, as opposed to a 500 or more square foot apartment. The miniaturization provides better affordability to wage earners because these living quarters are a fraction of the cost of a traditional apartment.
In addition, the government could put more resources into Section 8 housing instead of encouraging poor people to buy their own homes. Miniaturization could come to auto manufacture by allowing smaller cars to be built like the Tata Motors autos priced at a fraction of the cost of a standard size car. Zoning could be relaxed to allow more manufactured housing to be built-particularly near the coastlines.
Part of the unemployment problem will resolve itself with a wave of baby boomer retirees paving the way for millions of new college graduates and others to be hired. In addition, the government at every level should rebuild infrastructure throughout the United States because the future population in America will be close to a half billion people. This country cannot support such a growing population on the current infrastructure of the '60s.
End This Depression Now by Dr. Paul Krugman is a call to action to ameliorate longstanding negations in how our economy operates. People need to cut out wasteful consumption, save more and upgrade skills in preparation for the wave of retirements coming, as well as the need to repair the infrastructure for the next half century and beyond.
Credits: First Published On Blogcritics as End This Depression Now by Dr. Paul Krugman
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