Most economists say that deficit spending is needed during a severe recession and that if the government cuts spending too much, it can trigger a depression, which is what happened in 1932. But Nobel Prize-winning economist Paul Krugman raised an interesting question about whether state spending cuts may undermine the federal spending. “Even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers – state governors who are slashing spending in a time of recession, often at the expense of their most vulnerable constituents and the nation’s economic future,” Krugman wrote. Because states have balanced-budget requirements, Krugman supports directing some of the stimulus spending toward the states through funding for food stamps and Medicaid, state- and local-level infrastructure projects and aid to education.
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