Is Europe Reading Paul Krugman, or History?

Paul Krugman is doing his thing again, talking up the 1937 recession and Japan's lost decade, repeating last week's lesson on liquidity traps, and blasting critics who have begun calling for an end to stimulus spending. He's got columns. He's got graphs. Hey Europe, are you paying attention?

On his blog, Krugman swats away conservatives impatiently tapping their pens and waiting for the stimulus to fully plug up the jobs leak with this graph, which illuminates the stimulating power under Reagan of tax cuts, which were basically the bulk of the GOP's proposed stimulus back in January and remain conservatives' panacea for all seasons. Lesson being: recessions take time.

And even when they're over, they're not really over. In his column today, Krugman cites the re-recession of 1937, where fiscal hawks in FDRs cabinet convinced him to ease up on the stimulating and inadvertently plunged the US into a second depression that required a World War to end. Krugman writes: "We're not even experiencing the kind of growth that led to the big mistakes of 1937 and 1997. It's way too soon to declare victory."

And what of Europe? Our transatlantic friends aren't even experiencing the kind of growth that's embolding American deficit hawks (who aren't experiencing the kind of growth that led to the big mistakes of 1937 and 1997) to declare victory. But they're already in the deficit-reduction mode. Normally, I'd consider this a perfectly sensible idea. As I've written before, I think that despite the vertiginous back-and-forth over the United States' long term deficit, who to blame for it and how to fix it eventually, the fact remains that Europe is coming off the worst single quarter of job losses in the history of the EU. In the United States, it's unlikely that the president will abandon the stimulus any time soon, as he's recently proposed to rachet up the pace of spending. But Europe's eagerness to look for green shoots almost a year before some economists think the continent will see a bottom to the recesssion should concern not only Krugman, but any student of stimulus history.