1 thought on “Santagata Lecture: Temin Dissects the Economic Crisis

  1. An interesting talk by Professor Temin.

    It seems clear Professor Temin believes the “opposite of austerity” (i.e., INCREASES in annual federal government spending over and above what it spends each year already) is what’s needed to improve employment levels and help the economy recover. Doing such increases however will require either raising taxes or more borrowing, or both, because current revenues cover only about 60 cents of every federal dollar being spent, with the remaining 40 cents having to be borrowed. Let’s assume taxes are not going to be raised (if they are, it’s hard to see how that will improve employment levels or help the economy to recover more rapidly). The question that I did not hear Professor Temin address is whether significantly increased borrowing to do the “opposite of austerity” will cause the economy and employment to improve ENOUGH to service the significant increase in the debt, already at $17 trillion, that increase in federal borrowing will cause. (Especially if we remember that when and if the economy does start to improve faster, interest rates will go up from where they are now, perhaps quite rapidly, and the new levels of debt will get that much harder to service.)

    In the end, I suspect the United States will eventually devalue its currency as the only (and time-honored) to escape from the above box – and the people who will pay the price for that will be the children and grandchildren of the Bowdoin students in the audience, and the children and grandchildren of their peers, who will have to make their way in world of inflation that will make the 1970s look like a walk in the park.

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