Responding to Jack Welch's complaint that the country can't afford Obama's budget ("Austan’s budget is from the moon"), the Obama economic adviser had this to say at a panel discussion last week:
The budget is from the moon, Jack [Welch] is from Mars and Joe [Stiglitz, whose critique comes from the other direction] is from Venus.
Look, we enter the government essentially in a hotel that is on fire. We’re throwing people from the windows into the pool to save their lives and this is the evaluation of the Olympic diving committee.
Well, the splash was too big, there was something - look, we were facing in the fourth quarter of 2008 and the first quarter of 2009 epically horrible declines in GDP, every measure of the economy falling through the floor, completely on fire.
Joe will tell you, in every Ph.D. program, students - in economics, students must take an economic history class and in every economic history class, the professor says, “There could never be another Great Depression because we’re smarter than we were then and we would never allow that to happen.”
We were put to the test to answer that question. If you had asked people in 1929, “Here is what is about to happen. How much would you pay to avoid the Great Depression from occurring?” The answer is they would have paid a lot.
They would have borrowed money if it could be used to prevent the Great Depression.
The fact that we are here to bitch about the economy and about this policy and that and the budget forecasts for GDP growth are 1 percent too low, I’m thrilled, I’m overjoyed that we aren’t all out of our jobs and we prevented the Great Depression. That in itself is an overwhelming accomplishment.
I completely agree. It's remarkable how quickly the people now kvetching about inflation forget that we were on the verge of a massive deflationary spiral a few months ago. I guess the only downside to preventing a doomsday scenario is that it allows people to pretend the threat never really existed. Unfortunately, a lot of people are taking the administration up on that these days.
(Via Henry Blodget, via Marginal Revolution.)
--Noam Scheiber