Krugman worried that any prospects for the US avoiding depression would be scuppered by the collective action of the "fifty Herbert Hoovers" - the individual state governors acting to cut spending as the federal government tried to boost spending.
If the states deflate faster than the feds can inflate, then depression comes.
Apparently that is not the threat, but the 99 Herberts in the upper house of congress.
Some of the states are cutting brutally - my proximate indicator is from the cuts I hear passed down, planned for or rumoured in the university systems. Pay freezes and hiring freezes are not unexpected; mandatory pay cuts and department closures will hurt, and not just those affected but the local economies in ever spreading ripples.
And the university cuts are just tracers, the local governments are stopping purchases, releasing contractors and canceling projects that hire private companies like building contractors, just as private industry is contracting and they need the government work to have any hope of surviving the depression and being there when work picks up again.
As it must.
But, the states seem to mostly be doing what they can - raiding reserves, juggling cash flow and trying to keep things going. Mostly. Well, some anyway.
Right now the damage is being done by the Senate - where the "moderates" are looking to cut the stimulus package, which a number of economists worry is already too small.
The cuts are mostly symbolic - $50 million to be cut from the National Endowment for the Arts is 1/16,000th of the total cost, and might keep a couple of thousand artists busy.
But another proposal this week, cutting proposed increases for climate science and the NSF - which saves collectively about 0.2% of the stimulus cost is just bizarre, especially when a hundred billion dollars of ineffective tax incentives is then injected in its place.
If nothing else, more graduate students means fewer people hunting for jobs.
Graduate students are cheap. More is better.
A lot of them might even know useful interesting and original stuff in a few years.
I fear for the US, and in fact the world.
Too little action, too late, is almost as bad as doing wrong counterproductive things, and there is very little resiliency left in the system.
Must go read old Tanta posts on Calculated RIsk to reaffirm purpose, as Oliver Wendell Jones once said.
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Your facts are incorrect. Herbert Hoover did not react the the beginning stages of the Depression by cutting spending. he increased spending by the federal government. He created programs to increase the availability of loans. In fact, FDR campaigned against Hoover by criticizing Hoover increasing spending too much and for intervening in the economy too much.
http://volokh.com/posts/1232335004.shtml
The phrase is from Krugman and refers to Hoover's attempt to balance the budget during the depression.
Something the States are mostly required to do by local constitutions. The concern is over states trying to cut spending and amplifying the economic downturn as the fed tries to boost spending; some states are also trying to raise taxes.
The Senate right now has a faction trying to cut a number of items from the stimulus in the interest of allegedly responsible spending - they are going to do more damage with what they are choosing to trim, and possibly sink the broader recovery. They are replacing effective spending boosts with ineffective tax cuts.
Grad students are smart people earning less than their potential and spending little. In the short term, they're clearly deflationary.
@JKH: Only if said students would otherwise be in a higher paying job in the so-called real world. If the alternative to grad school is the unemployment line, then being a grad student is more stimulative for the economy.
Worse than that, they might go into finance and actively do creative destruction of GDP
No, wait, that was last year.
Seriously though, this is the macroeconomic side of the microeconomic dilemma of education - short term you gain if you skip education and go straight to work, this is recursively true down to about a 2 year old - as any old Icelandic "how to run a household" text will tell you, that is when they can be put to work combing wool or herding newborn lambs.
But, if you defer the income and stay in education, you recover the opportunity cost over time, including interest; up to some point - sending 100% of the population to do a 12 year English Lit PhD is probably a net loss, but some fraction should do higher education for both their and the economies long term gain.
How many, and when, depends on local economic conditions - all things being equaly, is jobs are rare, then it is better for both individuals and the economy to stay in education longer.