Paul Krugman writes about the main arguments of the paper:
The headline point is the argument that austerity when you’re in the liquidity trap may well worsen, not improve, your long-run fiscal position; I’ve been making the same point for a couple of years, but Brad/Larry present some evidence from the birth of Eurosclerosis and the downgrading of US potential output estimates since the crisis began.They also emphasize the crucial point that even if austerity doesn’t literally worsen the long-run position, it does at best very little to improve that position — yet imposes large current costs. So the cost-benefit analysis is overwhelmingly in favor of stimulus as long as you’re in the liquidity trap.
And what that says, in turn, is that the embrace of austerity by policy and political elites in late 2009 and early 2010 was an almost inconceivably terrible blunder. The result of that embrace was the imposition of huge economic and human costs, with little if any benefit.
DeLong/Summers will be controversial, as it is at the center of the debate about the consequences of fiscal policy in the most recent economic crisis, which is an important topic when it comes to the campaigns of Democrats and Republicans for the United States presidential election.
