The day after Barack Obama was re-elected, the Dow Jones lost 312.96 points. It wasn't just that investors were hoping for the lower taxes and further deregulation that would come with a Romney win. The news from Europe was bad, and pundits were obsessively focused on the "fiscal cliff" of mandatory budget cuts that will drive the economy into a new recession unless Congress jumps off its own budgetary cliff first.
For once, the markets are right. But the news from Europe entirely contradicts conventional assumptions about the fiscal cliff.
Greece, which has dutifully cut its budget as demanded by the leaders of the European Union and the European Central bank, is deeper in depression than ever. The latest reports show its economy has shrunk by more than 20 percent over four years, and that the more that it cuts its deficit, the more its national debt grows.
How can that be? Budget cutting in a depression just deepens the depression. The deeper the depression, the less revenue the government takes in.
So if the United States does not want to "become like Greece," cutting the deficit in a still-depressed economy is the wrong way to go.
The ravages of Hurricane Sandy, with rising oceans forecasted to worsen in coming years, suggests that we will need to spend hundreds of billions of dollars on rebuilding coastal infrastructure-a policy that will also create jobs and stimulate a recovery.