It is popular these days to compare current hard times to the Great Depression. The temptation is easy to understand. Because the events of the 1930s convey high drama and not a little romance, they make a good lead for almost any article. Of course, there's enough difference between these two events to render such links misleading from time to time, but one very fundamental and important parallel does exist. As in the Great Depression, the crisis of 2008-2009 muddled perceptions about how the economy works, how effective policy moves will be and how the economy will perform in the future. The attendant insecurity has fostered general reluctance in the business community and that has muted all economic responses, even to the best-conceived policies.

The extent of this muddling was evident in the recent election campaign. Still, through the fog, two basic narratives emerged: On the left of the political spectrum are the neo-Keynesians, led by columnist Paul Krugman. This group would ratchet up government spending and borrowing still more, to "jump-start," in the popular phrase, the economy. On the right, apart from the bias against big government, the analytical focus seems to lean toward monetary policy. This group would have the Federal Reserve, the Bank of England, the European Central Bank and other central banks keep markets well supplied with liquidity, effectively greasing the wheels of commerce until more fundamental healing can occur. There is dispute within this camp as to the appropriate extent and duration of such monetary ease, but this general approach seems to be where the bulk of their analytical effort has gone.

Krugman and the neo-Keynesians have argued strenuously against worrying about the size of government or budget deficits. They contend that even higher levels of government borrowing and spending would foster enough growth ultimately to pay for themselves with increased tax revenue. Krugman and his colleagues, University of California at Berkeley economist Brad DeLong prominent among them, continue to argue this line despite the failure of the massive 2009 stimulus effort, either its inability to generate much economic acceleration or President Obama's admission that there were not enough "shovel-ready" projects. Rather than being chastened by that failure, they claim that the effort, massive as it was, was insufficient. They point out that during the Great Depression, it took the truly massive spending triggered by World War II to get the economy going. So far Krugman & Co. have resisted the temptation to advocate declaring war.