Paul Krugman: Encouraging Signs for a Brighter 2014

There's an alarming amount of optimism out there about the United States' economic prospects for 2014. Let me make the situation even more alarming by saying that I basically share that optimism. Why? Because of the Three Stooges effect: if you've been banging your head against a wall for no good reason, you'll feel a lot better when you stop.

One way to describe the American economy in 2013 is to say that it was, in effect, trying to begin a strong recovery, but was held back by terrible federal fiscal policy. Housing was making a comeback; if state and local austerity policies were not going into reverse, at least they were not getting more intense; and household spending was starting to revive as debt levels came down.