Doing what works

As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.

And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?

- Paul Krugman

Any person with conservative views about economic issues might be expected to embrace massive government spending programs at this time. Strangely, this has not been the case in the United States.

Government spending at a time like this has nothing to do with socialism. It has as much to do with socialism as the use of a cardiac defibrillator has to do with electrocution, or the administration of Demerol in an intensive care unit has to do with running an opium den.

At a time like this, "the conservative thing" is to do whatever is most likely to prevent your patient -- i.e. the economy -- faced with a debilitating illness from getting much worse. That's why the Republicans have behaved recklessly in attempting to water-down -- or altogether thwart -- the Obama stimulus package. Yes, excessive government spending could cause inflation, but for this side-effect there is a treatment (monetary authorities could raise the interest rates). Deflation, as Krugman points out, is another story -- a nightmare.

Given the prognosis that the patient's condition is likely to severely worsen, a conservative doctor would not hesitate to use whatever treatment was most likely to bring about recovery. At a time like this, any truly conservative politician would behave no different.

By contrast, the Republicans remind me of those religious groups that forbid the administration of life-saving blood transfusions to accident victims out of deference to church dogma.