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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWe Decided as broad government policy to not have an Economic Recovery
Last edited Wed Sep 25, 2013, 04:19 PM - Edit history (4)
The orange line is where total American government spending (combined federal, state, local) would be if we had spent, 2008-2013, at the rate we did beginning in 2001. The blue line is what we really did.
If the blue line was where the orange line is we could be seeing the edge of the woods we're in by now. Unemployment a couple points lower, GDP a few points higher. Our economic crisis is, at this point in time, almost entirely the product of low government spending. (combined federal, state, local) We decided, as a political matter, nationally, to not recover.
We CUT government spending (combined federal, state, local) in response to the greatest collapse of demand since the Great Depression. Cut. Reduced. We added cuts in GDP from austerity to cuts in GDP from the private economy collapsing. We laid people off to fight unemployment. It is unthinkable, impossible, insane... but we did it. And we continue to do it.
We, America, DECIDED not to recover, primarily by electing Republicans to control government spending (House of Representatives and State Houses) but also to a smaller degree by supporting deficit-fearing, inflation-hawking, bond-bubble imagining stances on the Democratic side. The rightward shift of the center on fiscal policy affects both parties. (How many elected officials have stated that the federal deficit needs to be higher? It is an economic fact, and behind closed doors some Dems must get it, but who, outside the hippie camp, even has the nerve to say it out loud? And with reason, since voters would punish them.)
And we are somewhat trapped, politically. The practical politics of arguing that the economy is okay, in order to make Obama look good, have blinded many to the biggest political/economic story of our lives, and white-washed a Republican crime (state, federal, local) on the scale of invading Iraq; the decision, as broad policy, to not recover from an economic calamity.
This is not a new story. It is a distressingly old story that most people (including a fair number of Democrats) refuse to see. Fortunately, Doctor Krugman remains on the case:
Heres a comparison of two series. One is actual government purchases of goods and services since the Great Recession began (this is at all levels; most of the fall has been state and local, but the Federal government could have prevented that with revenue sharing). The other is what would have happened if those purchases had grown as fast as they did starting in the first quarter of 2001, i.e., in the Bush years.
As you can see, the gap is large and has been growing rapidly; its currently at about 400 billion 2009 dollars, or more than 2 1/2 percent of GDP. Given reasonable multipliers, this suggests that real GDP is somewhere between 3 and 3.75 percent lower than it would have been without the austerity. And given the usual Okuns Law rule of half a point of unemployment per point of GDP, this in turn says that without the austerity wed have an unemployment rate well under 6 percent, maybe even under 5.5 percent.
I dont want to pretend to spurious precision here. Instead, I just want to make the point that given what we know and have learned about macro these past five years and given the modest recovery that has taken place were now at a point where, to repeat, to a first approximation the depressed state of the economy is entirely due to destructive fiscal policy.
http://krugman.blogs.nytimes.com/2013/09/24/the-depressed-economy-is-all-about-austerity/
Wounded Bear
(58,440 posts)for the 1%.
Other than that, Dr Krugman is on point, as usual.
The Magistrate
(95,237 posts)msongs
(67,199 posts)uponit7771
(90,225 posts)geek tragedy
(68,868 posts)There are few guarantees in life--bad consequences for putting Republicans in office is one of them.
Rex
(65,616 posts)If you vote for a Republican, you have no right to complain. Same with people that don't vote imo.
Andy823
(11,495 posts)Don't allow the crazy tea party clowns to get into office like they did in 2010! I would think that after that debacle anyone could see that not voting was a bad idea. For those who "want" the tea party to take control so they can "teach the democratic party a lesson", and who think that having the nuts in charge will force the party to change "after" the tea party has done it's dirty work, open up your eyes and see just how bad it would be "after" they put us in a worse recession than Bush did! Letting the crazy run things is by far worse than the "lesser or two evils"!
RC
(25,592 posts)That is pretty much as counter productive.
geek tragedy
(68,868 posts)in the Republican party.
Not a single Democrat--NOT ONE--voted to cut SNAP this past week.
94% of Republicans (217/232) voted to take food out of the mouths of hungry children.
http://www.sfgate.com/news/politics/article/House-votes-to-cut-4B-a-year-from-food-stamps-4826559.php
So, spare me this nonsense about them being the same. They're not.
former9thward
(31,805 posts)All Democrats in the Senate voted to cut food stamps by $4 billion in June. http://www.chn.org/human_needs_report/chn-senate-passes-farm-bill-with-cuts-to-snap-as-house-prepares-to-bring-even-more-devastating-bill-to-the-floor/
geek tragedy
(68,868 posts)former9thward
(31,805 posts)So they indeed are not the same. There will be a final bill eventually. We'll see what it looks like then.
RC
(25,592 posts)Just because ON THIS ISSUE they voted the correct way, does not mean they normally lean Democratic on other important issues. On issues like Wall Street, Big Banks and even wars, they quite often vote for the 1% over the 99%. Extending bu$h's tax breaks for the 1%? bailing Wall Street and not Main street? Not getting behind and correcting the real reasons why unemployment is still so high? Government spending to get money circulating in the economy in this country is what gets us out of recessions. Not allowing the exporting of Living-Wage-Jobs is what gets us out of recessions.
Spying on American citizens? Appointing Republicans to head agencies?
You are correct, enabling is not the same as being Republican.
We need to elect more Center and Left of Center Liberals to fix the wrongs in this country. Saying, or implying the DLC and DINO's are somehow not part of the problem is being selective blind.
The DLC and DINO's are on the wrong side of Center. That, in large part, is why the recovery has been so slow. And is, in no small way, all the Republicans fault.
Jefferson23
(30,099 posts)That would be too depressing for a sig line.
Pretzel_Warrior
(8,361 posts)To what Germany is enforcing on Spain, Italy, Greece, and now France.
We are watching an inexorable macro economic move toward global standard of living equilibrium. This means countries with high standards of living are sinking and those of low standard are slowly and steadily rising.
This is a great deal for the ownership class. Bad deal for working class.
cthulu2016
(10,960 posts)Our austerity has occurred mostly at the local and state levels. American government spending is more decentralized than most. We have state government larger than the federal governments of most nations.
The drop in total government spending in the chart is impressive, but I doubt many non-economists know it even occurred.
questionseverything
(9,631 posts)for every dollar we spend on fs we get $1,79 in gdp
when cuts to fs are called for that pol is further depressing economy
leftstreet
(36,081 posts)WE didn't do any of this, THEY did
cthulu2016
(10,960 posts)even though the folks at the top brainwashed everyone, once brainwashed, folks become effective agents of "them."
A small "they" created the popular notion that the federal deficit hurts the economy, intrinsically, and a small "they" promulgated a level of economic ignorance such that a body politic could not understand what happens when fed rates get down to zero, but "they" having done their work well, we now have a nation that by large majorities believes some economic truths that are simply false.
Thus any politician who proposes a real solution to any current economic problem is as likely to be tarred-and-feathered as to be elected.
At the end of the day, even if "we, the people" didn't start the fire, "we" do stand around watching it burn, and ridicule anyone suggesting throwing some water on it.
Hydra
(14,459 posts)This was a policy decision. The 1% are getting almost all of the benefit of the limited recovery while real inflation is going through the roof and the safety net is being disassembled.
The real question is, how long can they continue to do this before it starts killing large numbers of people? A fair number have already been "eliminated" from the system, but those were the "invisible" people. This policy leads to a continuing downward spiral, so at some point it's going to happen.
Andy823
(11,495 posts)Is to make sure we vote the teapulicans out of office next year, and make damn sure we get a democrat in the WH come 2016! If we don't then we will think that what Bush did was a cake walk compared to what will happen if teapublicans control everything. Kiss all the progress that has been made since 2008 goodbye!
Hydra
(14,459 posts)And the current policy is coming from a Dem WH. How are we supposed to vote that's going to fix this?
Andy823
(11,495 posts)The tea party nuts are far worse than you average republican, although they both need to go. While maybe you get out and start finding democrats to vote for, ones that may not think "exactly" like you do, but won't be near as bad as some tea party nut or a republican that is afraid of those tea party nuts.
I don't always agree with president Obama, and I don't always agree with my two Senators who are both democrats, and I sure as hell don't agree with my House rep who is a lazy republican who just goes with the flow. However they my two senators have done more to help the country get back on track than ANY republican that might have won. There is NO politician that will agree with everything, and everybody, it just isn't possible, but have seen a lot of change since Obama became president, and a hell of a lot of that change is positive, which for me outweighs the things that I didn't like.
ProSense
(116,464 posts)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, its 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 shouldnt: slashing spending in the face of a depressed economy...if it werent 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...Were 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.
- more -
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
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 youd 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 presidents policies have failed.
Think of it as a two-part strategy. First, obstruct any and all efforts to strengthen the economy, then exploit the economys weakness for political gain. If this strategy sounds cynical, thats because it is. Yet its the G.O.P.s best chance for victory in November.
- more -
http://www.nytimes.com/2012/09/10/opinion/krugman-obstruct-and-exploit.html
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 presidents economic plans, Republicans can point to weak job growth and claim that the presidents policies have failed.
http://krugman.blogs.nytimes.com/2012/09/08/the-jobs-program-that-wasnt/
Bernardo de La Paz
(48,789 posts)phantom power
(25,966 posts)leveymg
(36,418 posts)The Mandarins at the Fed figured the country couldn't afford to do both.
So, it's Dollars out of our pockets and upward into theirs. That's the way they wanted it, all along.
neverforget
(9,434 posts)the federal government provides to the people such as Medicare, Medicaid, SSI, SNAP, Veterans benefits, infrastructure, etc. The military however, is never big enough for them.
nashville_brook
(20,958 posts)as with trying to neo-lib our way out of the wreckage of trickle-down.
woo me with science
(32,139 posts)IronLionZion
(45,261 posts)To the point of gov. spending there were about a million jobs cut from local government, like teachers and police. That was a big decline in spending, income tax revenue, and GDP, while increasing our unemployment and adding to the competition for private sector jobs which lowers wages.
And a big reason for that was the decline in housing prices and property tax revenue. I've read studies that a much cheaper and effective stimulus might be to take on debt (at lowest interest rates this country will ever see) to rehire teachers and police and other local gov employees across this country.
Why are Dem politicians afraid of debt? Debt was used so many times for war, why not use it for economic stimulus? Its not even Keynesian building projects, its rehiring workers who have lost their jobs.