lABOR pOT

[discocrisco01]

According to the Washington Post, the long-term consequences of policy makers obsession with the deficit will have consequences for a long time

* The paper offers a depressing portrait of where the economy stands nearly six years after the onset of recession, and amounts to a damning indictment of U.S. policymakers.
* Their upshot: The United States's long-term economic potential has been diminished by the fact that policymakers have not done more to put people back to work quickly.
*Our national economic potential is now a whopping 7 percent below where it was heading at the pre-2007 trajectory, the authors find.
* As those workers’ productive capacity diminishes, so does the total potential of the U.S. economy.
* There is a tendency to think of a nation’s “aggregate supply,” or potential output, as something that exists outside the realm of influence by short-term economic policy.

This is a point that Paul Krugman and Joseph Stiglitz have been arguing about for a long time. However, it seems that Krugman and Stiglitz arguments have been ignored by Congress in favor of massive deficit reduction. If both Krugman and Stigilitz are correct, the long-term deficit would still be massive because there was not enough done to ensure long-term growth of the economy and reign in long-term unemployment.

However, the "GOP" always states that we have spending problem. If the point of this article is correct, the reality is that we did not do enough spending.