Attendees at the Association of National Advertisers annual conference here likely weren't taken aback, considering Krugman's presentation to the group was titled “The (Dire) State of the Economy.”
Krugman said the U.S. is in for “a very long, painful period when recovery doesn't feel like a recovery.” When will it seem like better economic times have finally arrived? “Maybe late in President Palin's first term,” the well-known liberal quipped.
“The economy is depressed because people don't want to spend. ... Everybody trying to save money makes the economy worse,” he said, adding that the federal government's stimulus package wasn't large enough relative to the overall size of the U.S. economy to have a significant impact.
“The best hope, the thing that could really pull us out, is major innovation on the part of the business sector,” he said, adding that it would have to be “something so great that they need to invest.” That is what happened, he said, in 1993 when the great IT boom transformed a sluggish economy.
In the long run, things will improve, Krugman said, but he quickly followed with a quote from one of his heroes, the economist John Maynard Keynes: “In the long run, we are all dead.”