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Hullabaloo


Friday, July 06, 2012

 
Shades of grey (austerity): remember what they did to you

by digby

In case you are wondering just why there have been such dismal job numbers and the government is doing everything it can to make it worse, here's a handy little primer on who's really responsible:

1. Filibustering the American Jobs Act. Last October, Senate Republicans killed a jobs bill proposed by President Obama that would have pumped $447 billion into the economy. Multiple economic analysts predicted the bill would add around two million jobs and hailed it as defense against a double-dip recession. The Congressional Budget Office also scored it as a net deficit reducer over ten years, and the American public supported the bill.

2. Stonewalling monetary stimulus. The Federal Reserve can do enormous good for a depressed economy through more aggressive monetary stimulus, and by tolerating a temporarily higher level of inflation. But with everything from Ron Paul’s anti-inflationary crusade to Rick Perry threatening to lynch Chairman Ben Bernanke, Republicans have browbeaten the Fed into not going down this path. Most damagingly, the GOP repeatedly held up President Obama’s nominations to the Federal Reserve Board during the critical months of the recession, leaving the board without the institutional clout it needed to help the economy.

3. Threatening a debt default. Even though the country didn’t actually hit its debt ceiling last summer, the Republican threat to default on the United States’ outstanding obligations was sufficient to spook financial markets and do real damage to the economy.

4. Cutting discretionary spending in the debt ceiling deal. The deal the GOP extracted as the price for avoiding default imposed around $900 billion in cuts over ten years. It included $30.5 billion in discretionary cuts in 2012 alone, costing the country 0.3 percent in economic growth and 323,000 jobs, according to estimates from the Economic Policy Institute. Starting in 2013, the deal will trigger another $1.2 trillion in cuts over ten years.

5. Cutting discretionary spending in the budget deal. While not as cataclysmic as the debt ceiling brinksmanship, Republicans also threatened a shutdown of the government in early 2011 if cuts were not made to that year’s budget. The deal they struck with the White House cut $38 billion from food stamps, health, education, law enforcement, and low-income programs among others, while sparing defense almost entirely.

There have also been a few near-misses, in which the GOP almost prevented help from coming to the economy. The Republicans in the House delayed a transportation bill that saved as many as 1.9 million jobs. House Committees run by the GOP have passed proposals aimed at cutting billions from food stamps, and the party has repeatedly threatened to kill extensions of unemployment insurance and cuts to the payroll tax.

I'm not going to blame President Obama for this. He clearly wanted something more. But I will second this from Noam Scheiber, who notes that the private sector isn't actually fine and something more must be done:

The upshot is that we’re no longer in a world where sending states a few tens of billions of dollars to shore up their finances is going to get the recovery on track. The economy, by which I mean the private sector, is disconcertingly weak, and strengthening it is going to take something on the order of several-hundred-billion dollars.

The good news is that Obama actually has a plan of roughly that magnitude—the $450 billion American Jobs Act he proposed last September, replete with new payroll tax cuts and additional aid for the unemployed. The bad news is that, in the vein of his “private sector is doing fine” comment, we’ve heard remarkably little about this package in recent months. I’m not sure if that’s because Team Obama believes focusing on it would draw attention to how fragile the economy is at an inconvenient time in the political cycle. Or because, after three plus years of intransigence, Obama has calculated that Republicans aren’t going to abruptly drop their deal-breaking opposition. But, regardless, I think it’s the wrong strategy.

One theme that runs through numerous White House missteps these last few years is the impulse to game out what the political constraints will allow, then proceed within them, rather than start with the optimal policy and fight for as much as they can get. (The major exception was the Jobs Act … before it was shelved.) But with the unemployment rate stuck above eight percent only four months before Election Day, maybe the latter is worth a shot. Sometimes good policy really is the best politics.
To those who believe the bully pulpit is a joke and that elections are entirely decided based upon how much cash individual voters have in their pocket when they step into the voting booth, this might not be persuasive. But if you think that people do tune in to what candidates are saying at some point in the cycle and are able to reason at all, it might help at the margins if the Obama campaign went back into "it's a do-nothing-congress, pass my jobs bill" mode. I'm fairly sure it couldn't hurt.

And who knows? Maybe educating the public a little bit about economics in the process might just help the country stave off know-nothing austerity in the future. Again, fairly sure it won't hurt.


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