The New York Times has the OpEd The Timidity Trap by Paul Krugman.
And I’d argue that an important source of failure was what I’ve taken to calling the timidity trap — the consistent tendency of policy makers who have the right ideas in principle to go for half-measures in practice, and the way this timidity ends up backfiring, politically and even economically.
The classic example is the Obama stimulus, which was obviously underpowered given the economy’s dire straits. That’s not 20/20 hindsight. Some of us warned right from the beginning that the plan would be inadequate — and that because it was being oversold, the persistence of high unemployment would end up discrediting the whole idea of stimulus in the public mind. And so it proved.
What’s not as well known is that the Fed has, in its own way, done the same thing. From the start, monetary officials ruled out the kinds of monetary policies most likely to work — in particular, anything that might signal a willingness to tolerate somewhat higher inflation, at least temporarily. As a result, the policies they have followed have fallen short of hopes, and ended up leaving the impression that nothing much can be done.
This is another ironic Paul Krugman piece where he unknowingly identifies his own problem and blames it on others.
The irony is that a purported Keynesian economist is too timid to come right out and say what it is that Keynes taught us. There is no monetary solution to this problem. Anybody who pretends that the Fed has any effective tools to combat the type of Great Recession that we faced is setting us all up for a huge disappointment.
Krugman does identify the weakness in Obama’s stimulus. He should never leave that topic. To hint that there is another solution in the hands of the Fed is to promote Milton Friedman propaganda. At various points, Krugman admits that he was mesmerized and bamboozled by Friedman, but he seems to forget these moments of clarity for the most part.