Aug 10 (Reuters) - The U.S. government saved the country from a “full replay” of the Great Depression, Nobel Prize-winning economist Paul Krugman wrote in an opinion column in the New York Times on Monday.
“Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen,” Krugman wrote.
“Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid,” Krugman wrote.
Krugman said the measures helped support the economy in its time of need, unlike in the 1930s when federal spending was a much smaller percentage of GDP.
“This means that budget deficits — which are a bad thing in normal times — are actually a good thing right now,” Krugman wrote.
Krugman said that in addition to the “automatic” stabilizing effect created by the government, a depression had been avoided due to the government’s help in rescuing the financial sector and President Barack Obama’s stimulus plan. (Reporting by Ajay Kamalakaran in Bangalore; Editing by Rupert Winchester)