Paul Krugman: Bursting Bubble Blues

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(snip)
So this is probably just the beginning. How bad can it get? Well, you don’t have to go far to find grim forecasts: Merrill Lynch predicts that the unemployment rate will rise from 4.6 percent now to 5.8 percent by the end of next year.

In case you’re wondering, I don’t blame the Bush administration for the latest bad economic numbers. If anyone is to blame for the current situation, it’s Mr. Greenspan, who pooh-poohed warnings about an emerging bubble and did nothing to crack down on irresponsible lending.

Still, the bad news will have political consequences. The Bush administration has been trying to shift attention away from the disaster in Iraq to an allegedly booming economy. That strategy wasn’t working too well even when the headline numbers were good, because it never felt like a boom to most Americans. But now even the headline numbers have turned lousy.

And if that hurts the G.O.P. in next week’s election, well, there’s a certain poetic justice involved. The administration tried to claim undeserved credit for the positive effects of the housing boom, so why shouldn’t it receive some blame for the negative effects of the housing bust?

http://economistsview.typepad.com/economistsview/2006/10/paul_krugman_bu.html

http://select.nytimes.com/2006/10/30/opinion/30krugman.html