The GOP-manufactured debt crisis — one that exists in large part because of bad economics and poor fiscal management — only adds another layer of bad economics on a bad economic situation. Yes, a lot of bad economics.
In a recession we are cutting $900 billion of discretionary government spending. How will that help? We have a demand crisis more than we have a debt crisis. Further cuts in government spending will slow our economic recovery, prolong our economic hardship.
We are in a recessionary economy. We need demand and government can help support that demand. At the end of World War II, the United States hit debt levels exceeding 20% of GDP — much higher than our debt today — but people then did not choose to cut government. Very much to the contrary, they ran with these deficits for several years, supporting programs like the GI Bill and massive infrastructure investments like interstate highways, among many others. In time, the economy gained strength and helped create wealth and opportunity for all Americans, rich and poor.
Who would’t welcome an economy on par with the 1950s today?
Our current economy is starved for demand. Money is not moving in today’s economy, consumers don’t have the spending power or the powering power that had become the foundation of our economic growth. Moreover, business is not investing in the United States despite record cash reserves. The entire argument that cuts will spur growth is a misleading political lie. We’ve had the cuts. Where are the jobs? (In China, India, Mexico…)
This is a classic example of when government can help support demand and growth, but we are running in the opposite direction.
Even voodoo economists see the light. We are not pursuing economically sound policies to correct our immediate economic needs. We need to set things right with our economics so we can look down the road to better forecast and plan for future fiscal policy.
Next let’s think about what has happened to politics so that conservatives would be willing to risk the financial security of our nation to win a political battle. It is party over country for Republicans today. Is that patriotic?