"Austerity Isn't Working"

"For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should—by spending more to offset falling private demand—but with fiscal austerity, slashing spending in an effort to balance their budgets.

"Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the 'austerians' insisted that the reverse would happen. Why? Confidence!"

In The New York Times, Paul Krugman lays into neo-Hooverian economics.