Is austerity making things worse?

NEW YORK | It seems that there is already a critical mass of economists suggesting that the whole austerity passion that all of a sudden possessed world leaders is just the wrong passion.

In this Monday CNN’s interview, Nobel economics laureate Joseph Stieglitz said he thinks the US government has to go away from austerity and go for a growth strategy. The same applies to Greece: if they continue to impose austerity, he says, the economy will slow down and fiscal problems will get worse. Stiglitz also remembers that the whole crisis began when the US mismanaged their economy and exported their problem to Europe.

He is not the only one. In another recent comment, another Nobel economics laureate Paul Krugman has attacked also the new deficit reduction hysteria: in his article The Hijacked Crisis he charges against Obama for accepting the new mantra:

“For more than a year and a half — ever since President Obama chose to make deficits, not jobs, the central focus of the 2010 State of the Union address — we’ve had a public conversation that has been dominated by budget concerns, while almost ignoring unemployment. The supposedly urgent need to reduce deficits has so dominated the discourse that on Monday, in the midst of a market panic, Mr. Obama devoted most of his remarks to the deficit rather than to the clear and present danger of renewed recession. What made this so bizarre was the fact that markets were signaling, as clearly as anyone could ask, that unemployment rather than deficits is our biggest problem.”