HELLO!!! Economists See Deficit Emphasis as Impeding Recovery
WASHINGTON — The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists.
After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery.
Hardly a day goes by when either government analysts or the macroeconomists and financial forecasters who advise investors and businesses do not report on the latest signs of economic growth — in housing, consumer spending, business investment. And then they add that things would be better but for the fiscal policy out of Washington. Tax increases and especially spending cuts, these critics say, take money from an economy that still needs some stimulus now, and is getting it only through the expansionary monetary policy of the Federal Reserve.
“Fiscal tightening is hurting,” Ian Shepherdson, chief economist of Pantheon Macroeconomic Advisors, wrote to clients recently. The investment bank Jefferies wrote of “ongoing fiscal mismanagement” in its midyear report on Tuesday, and noted that while the recovery and expansion would be four years old next month, reduced government spending “has detracted from growth in five of past seven quarters.”
http://www.nytimes.com/2013/05/09/us/deficit-reduction-is-seen-by-economists-as-impeding-recovery.html?hp&_r=0&pagewanted=print
= new reply since forum marked as read
Response to spanone (Original post)
I posted this in a separate thread, which is likely to be ignored, and no doubt the comments deflecting attention from the NYT article calling out Republicans will appear here.
Posted by Greg Sargent
It’s been widely pointed out by liberals that much of the discussion of fiscal issues conducted by supposedly “neutral” reporters actually does take sides in a pernicious way. It often treats it as a given that near term deficit reduction is a good thing — sometimes even cheerleading for that outcome – when in fact there is an actual policy dispute over this point, with many arguing that immediate deficit reduction is destructive to the recovery, and that dealing with the deficit should be deferred until the economy is stronger.
And that’s why today’s big New York Times piece quoting a range of economists arguing that Washington’s deficit obsession has proven a drag on the recovery is so important and welcome. The piece states clearly and unequivocally that the consensus view among economists is actually the one that’s often marginalized — i.e., that short term deficit reduction and spending cuts hurt the economy:
The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists.
After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery.
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But the simple fact remains that even if Obama continues to flirt with deficit-obsessed rhetoric and continues to push for some spending cuts, he wants more stimulus spending and wants deficit reduction to be balanced via higher revenues from the wealthy, while Republicans are pushing solely for still more spending cuts. The Times comes as close as possible to flatly stating that one side’s approach is far more threatening to the recovery than the other’s is:
In all this time, the president has fought unsuccessfully to combine deficit reduction, including spending cuts and tax increases, with spending increases and targeted tax cuts for job-creation initiatives in areas like infrastructure, manufacturing, research and education. That is a formula closer to what the economists propose. But Republicans have insisted on spending cuts alone and smaller government as the key to economic growth.
Today, Obama will travel to Texas, where he will renew the push for more stimulus spending. At the same time, House Republicans are expected to pass a measure that would allow the Treasury to pay off bondholders without a debt ceiling hike, a move designed to set the stage for Republicans to try to use the debt limit to extort still more spending cuts....The shrinking deficit shows clearly that Congress could very easily be spending more to alleviate the unemployment crisis without hurting the country’s near term fiscal outlook. But Congress isn’t doing that. And so, it’s often said that “Washington’s” deficit obsession is holding the recovery back, which is certainly true. But it’s worth stating as clearly as possible that according to the broad consensus of economists, one party is far more of a threat to the recovery than the other is.
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http://www.washingtonpost.com/blogs/plum-line/wp/2013/05/09/the-morning-plum-one-party-is-threatening-the-recovery-far-more-than-the-other-is/
KRUGMAN: Bad news for Dr Evil fans: Days of 1 TRILLION $$$ deficit-OVER-In fact-deficit falling FAST
http://www.democraticunderground.com/10022817494
Here's the thing, President Obama has talked about cutting the deficit, and his efforts have worked. At the same time, he has offered stimulus to create more jobs. The key is that his proposals were paid for, but Republicans still blocked them.
To give an idea of just how much Republican belligerence is slowing the recovery, here's Krugman a year after Republicans blocked the President's 2011 jobs proposal:
Macroeconomic Advisers on the American Jobs Act, proposed a year ago:
We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.
-The various tax cuts aimed at raising workers’ after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would:
-Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013.
-Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline
Of course, it that had happened, Obama would be more or less a lock for reelection. Instead, having blocked the president’s economic plans, Republicans can point to weak job growth and claim that the president’s policies have failed.
http://krugman.blogs.nytimes.com/2012/09/08/the-jobs-program-that-wasnt/
By PAUL KRUGMAN
Does anyone remember the American Jobs Act? A year ago President Obama proposed boosting the economy with a combination of tax cuts and spending increases, aimed in particular at sustaining state and local government employment. Independent analysts reacted favorably. For example, the consulting firm Macroeconomic Advisers estimated that the act would add 1.3 million jobs by the end of 2012.
There were good reasons for these positive assessments. Although you’d never know it from political debate, worldwide experience since the financial crisis struck in 2008 has overwhelmingly confirmed the proposition that fiscal policy “works,” that temporary increases in spending boost employment in a depressed economy (and that spending cuts increase unemployment). The Jobs Act would have been just what the doctor ordered.
But the bill went nowhere, of course, blocked by Republicans in Congress. And now, having prevented Mr. Obama from implementing any of his policies, those same Republicans are pointing to disappointing job numbers and declaring that the president’s policies have failed.
Think of it as a two-part strategy. First, obstruct any and all efforts to strengthen the economy, then exploit the economy’s weakness for political gain. If this strategy sounds cynical, that’s because it is. Yet it’s the G.O.P.’s best chance for victory in November.
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http://www.nytimes.com/2012/09/10/opinion/krugman-obstruct-and-exploit.html
The strategy was part of Republicans' plan to make Obama a one-term President --- obstruct the recovery and them claim that the President's policies have failed. The impacts of Republican sabotage can be seen at the state level.
By PAUL KRUGMAN
The economic news is looking better lately. But after previous false starts — remember “green shoots”? — it would be foolish to assume that all is well. And in any case, it’s still a very slow economic recovery by historical standards.
There are several reasons for this slowness, with the most important being the overhang of household debt that is a legacy of the housing bubble. But one significant factor in our continuing economic weakness is the fact that government in America is doing exactly what both theory and history say it shouldn’t: slashing spending in the face of a depressed economy...if it weren’t for this destructive fiscal austerity, our unemployment rate would almost certainly be lower now than it was at a comparable stage of the “Morning in America” recovery during the Reagan era.
Notice that I said “government in America,” not “the federal government.” The federal government has been pursuing what amount to contractionary policies as the last vestiges of the Obama stimulus fade out, but the big cuts have come at the state and local level...We’re talking big numbers here. If government employment under Mr. Obama had grown at Reagan-era rates, 1.3 million more Americans would be working as schoolteachers, firefighters, police officers, etc., than are currently employed in such jobs.
And once you take the effects of public spending on private employment into account, a rough estimate is that the unemployment rate would be 1.5 percentage points lower than it is, or below 7 percent — significantly better than the Reagan economy at this stage.
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http://www.nytimes.com/2012/03/05/opinion/krugman-states-of-depression.html
This is why Republicans in Congress and State Governorships have been working hard to sabotage the recovery.
http://www.democraticunderground.com/1002322208
It's a vicious cycle, and the 2010 election made it worse. Republicans blocked job-creating bill that also offered aid to states, and then Republican Governors cut jobs at the state level.
and I even checked it before I posted.
Forgot the link though, but that quote I used is from the Obama administration's description of the American Jobs Act where he called for a 3% payroll tax cut. One which would give even larger benefits to the rich. The percentages would stay the same, but the dollar amounts would go up. The 2% payroll tax cut cost about $115 billion, the 3% cut would have cost $175 billion. And it would thereby give tax cuts of $81 billion to the richest 20% and less than $7 billion to the poorest 20%. Doubtless a total defeat for Reaganomics, and a blow for equality. 
That 2% got extended for a year is 2/3 of his original proposal.
Like I said - part of the AJA got passed, and that was the part Obama fought hardest for, constantly hitting the Republicans for the tax increase that was about to happen. And we all know that tax increases are bad.
So the fact that the accursed payroll tax cut gave far more benefits to the richest 10% than it did to the bottom 40% is somehow "nonsense"?
