Growth in both the U.S. and Europe looks set to return after long years of fiscal restraint but long-term fears remain, says Nobel prize-winning economist Paul Krugman.
"We've been hitting ourselves over the head with a baseball bat," Krugman said of the U.S. economy at an event in Sweden on Friday.
"We've now stopped hitting ourselves over the head with a baseball bat. So we start to feel better."
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Krugman – a noted Keynesian - said that he has become somewhat optimistic about the near future and predicted a "pretty decent" year of growth ahead for the U.S. He highlighted several incidences where "significant spending restraint" had rescinded – including the "sequester" a series of automatic spending cuts.
He also noted the payroll tax that funds Social Security which was raised two percentage points in January. These moderations, as well as changes in health care costs, are now complete, he said, but highlighted that it hasn't been without cost.