Expansionary Fiuscal Policy Was Never Tried

Paul Krugman:

The Great Abdication: What is Obama saying here? The important thing, I think, is that he has effectively given up on the idea that the government can do anything to create jobs in a depressed economy. In effect, although without saying so explicitly, the Obama administration has accepted the Republican claim that stimulus failed, and should never be tried again. What’s extraordinary about all this is that stimulus can’t have failed, because it never happened. Once you take state and local cutbacks into account, there was no surge of government spending....

[T]he failure of the stimulus that never happened has become conventional wisdom — which is what I feared would happen, two years ago, when I was tearing my hair out over the inadequacy of the original plan.

Yes, I know, it’s argued that Obama couldn’t have gotten anything more. I don’t really want to revisit all of that; my point here is simply that everyone is drawing the wrong lesson. Fiscal policy didn’t fail; it wasn’t tried.