Tuesday, January 31, 2012
Economy Spending cuts will harm economy
Posted by Max Brantley on Tue, Jan 31, 2012 at 12:37 PM
The Congressional Budget Office's latest report says fiscal austerity measures will harm the economy. Talking Points Memo summarizes.
You don't cut your way out of a recession, in other words.
Don't tell it to Tiny Tim and the rest of the Republican cohort who believe tax cuts for millionaires and the end of important government programs are the only paths to prosperity — for the 1 percent.
Which reminds me of a fine article on a similar topic in Vanity Fair, by Joseph Stiglitz, who writes about how government spending cured an earlier depression.
Of four major service sectors—finance, real estate, health, and education—the first two were bloated before the current crisis set in. The other two, health and education, have traditionally received heavy government support. But government austerity at every level—that is, the slashing of budgets in the face of recession—has hit education especially hard, just as it has decimated the government sector as a whole. Nearly 700,000 state- and local-government jobs have disappeared during the past four years, mirroring what happened in the Depression. As in 1937, deficit hawks today call for balanced budgets and more and more cutbacks. Instead of pushing forward a structural transition that is inevitable—instead of investing in the right kinds of human capital, technology, and infrastructure, which will eventually pull us where we need to be—the government is holding back. Current strategies can have only one outcome: they will ensure that the Long Slump will be longer and deeper than it ever needed to be.
Comments (57)
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Which wingnut is going to be first in mentioning the downturn in FDR's first and and part of second term?
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"The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.
At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes."
elwood: Sounds like you know about the Recession of 1937-38.
"Unemployment jumped from 14.3% in 1937 to 19.0% in 1938.[2] Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.[3] Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors, hourly earnings continued to rise throughout the recession, which partly compensated for the reduction in the number of hours worked. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production"
Read Stiglitz. Roosevelt went wobbly on spending. Then war intervened. But the spending continued afterward.
CBO: federal workers make 16% more than private sector workers = your tax dollars at work!
Paul Krugman to Japan late 90's - "print lots of money" = Ha!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
As Grover Norquist says: Starve the 'Beast' so the middle-class, poor and ne'er-do-wells will wither and drop off. And if need be...kill the Beast. Better to deny every non-zillionaire a helping hand than allow freeloaders a single suck at the public tit.
Corporate Welfare rules.
CBO kicker - "Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"- translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%.
Case-Shiller housing numbers out this morning and according to the Top 20 City index composite, prices declined in 17 of 20 MSAs, with gains posted only in Phoenix, Denver and Minneapolis. At 137.52, the Seasonally Adjusted composite dropped to the lowest since February 2003, and is now a third lower than the housing peak in April 2006. Yet the worst news is that, even with a 2 month delay, the housing drop accelerated into the end of the year, and the sequential drop of 0.7% was the biggest decline since March 2011.
"In order to stimulate the economy, President Roosevelt added a provision to the June 1936 Revenue Act that imposed a “significant increase” on higher incomes, according to Economist Francois R. Velde. Additionally, the act forced corporations to redistribute a larger share of profits to shareholders, taxing undistributed profits at a higher rate.
The result of this action was a decline in business investment that directly impacted hiring, raising the unemployment figures. Other studies add that the National Labor Relations Act (NLRB) or Wagner Act negatively impacted businesses by giving the labor movement greater clout in demanding higher wages."
U.S. consumer confidence as measured by the Conference Board declined to 61.1 in January, missing economist projections for a gain.
If you buy a 10yr United States Treasury bond today and hold it to maturity, you will receive a fixed interest payment on your money of 1.8% each year for ten years.
real nice. i wonder if inflation will wipe out that interest payment effectively making it a negative return. if not, that means we'll be in a 10yr depression.
thanks Ben! my mattress will work just fine.
>>Case-Shiller housing numbers out this morning and according to the Top 20 City index composite, prices declined in 17 of 20 MSAs,..<<'
That news is almost as good as fuel prices dropping. Housing prices have a ways to drop to reach a reasonable equilibrium value of Pre-Bush Bubble. I think we bought too soon. Waited two years after the BushBubble burst but shoulda waited another yr to save another 30K.
http://www.youtube.com/watch?v=kNqQx7sjoS8
Personally, I enjoyed seeing the prosperity that the voluntary distribution of wealth from trickle down economics bestowed to the economy.
BUT....ding ding ding!!!
If you buy a Krugman special...the Japanese 10yr bond instead....it will pay you a wonderful .95% each year for 10yrs. But their deflationary environment makes it more like a 1% payment....Rich!
I am so goddamn tired of Holmes and Hoodlifter and all the other trolls who will undoubtedly show up here.
The biggest---and it was huge---mistake of the Obama administration was in how they sold the stimulus package. I can't believe his advisers and idea men came up with the idea that selling the package with the promise of 8% unemployment was a good idea. They should have told the truth---without the stimulus, unemployment would reach 13, 14, even 15%. Then they would be hailed as the heroes they are. Instead we get moral and mental midgets like Griffin and the rest of the Norquist bunch doing their little happy dance while chanting "Ding, Dong, the stimulus failed". No it didn't, Tim. It averted another great depression. The only problem with the stimulus is it wasn't large enough thanks to the Senate that cares more it's goddamn rules (60 vote majority) than it does about the American people. Also, President Obama thought he was dealing with adults who had an ethical and moral center.
Mitt and all the rest of the Klowns accuse the White House of trying to make the U.S. into Europe when that is exactly what they are doing with their austerity mantras. Austerity is exactly the path that the European Union is taking and it's not working out for them. They are still in crisis mode, while we are at least seeing some growth and recovery.
We are being stymied in our recovery by insane, greedy, bastards, aka Republicans.
California is now officially out of money. March is coming fast.
Will there be a bumper sticker that reads "I miss Nancy" in the future?
I bet not.
>>
The result of this action [higher taxes on upper income] was a decline in business investment that directly impacted hiring, raising the unemployment figures. Other studies add that the National Labor Relations Act (NLRB) or Wagner Act negatively impacted businesses by giving the labor movement greater clout in demanding higher wages."<<
Yet, the best growth in GDP was in 1950 when those high tax rates and labor policies were still in effect.
http://www.taxfoundation.org/files/federal…
Will there be a Calif bumper sticker that says'
"Proposition 13 Fucked us All"
?
According to Dr. Roanld Utt:
"Although the benefits of a costly, infrastructure-focused stimulus package based on massive government spending may be intuitively attractive, past evidence suggests that the impact of government spending programs that are intended to encourage economic growth is very modest and unlikely to enhance recovery or deter recession. As noted above, the Japanese government implemented such a program during the 1990s, and the consequence was two decades of economic stagnation. Less ambitious infrastructure stimulus programs have been implemented in the United States over the past few decades, and numerous independent and government studies have concluded that these programs had little impact on economic activity or jobs."
And Holmes can't come up with an argument unless it's from the Koch brothers bought and paid for think tanks. You guys may love getting screwed royally, but the rest of us don't.
http://dc.streetsblog.org/2009/07/20/a-bri…
And your refutation of that argument is---you don't like the author? How about refuting the points that are made in the article with counters? Japan has been in stagnation for decades with high government spending. Do you challenge that fact?
>>numerous independent and government studies have concluded that these programs had little impact on economic activity or jobs."<<
Then surely you can cite some of these "numerous" studies.
???
probably not el., Moses Malone, Shawn Kemp, Kevin Garnett, Kobe Bryant, Bron Bron, and Melo have all done pretty well.
although affirmative action should allow for more whites to play the game. it's simply unfair that they pay these athletes based on the merits of their talent and value-add to their teams.
where's the outrage at their salaries!!! OUTRAGE!
Utt's Heritage foundation is a lobbyist group. Hardly an impartial or for that matter accurate source.
As a more timely comparison than Japan in the 90's, Greenland's recession around 2008 saw their government invest in people and not the 1%. Today, they are well underway to a recovery while holding their heads high that they did not shaft the 99%.
>>Japan has been in stagnation for decades with high government spending. Do you challenge that fact?<<
Another in a long list of reasons why a Republican should never be in charge of any economy.
Japan's ascendancy and market triumphs were built upon what? Hint: starts with an E
Have you heard of a nation called China? Of rising fuel prices (Japan imports 90% of their fuel) ?
In other words you can't refute that Japan is in stagnation after decades of heavy government spending. Japan is far more comparable to our economy than 'Greenland'. Thank you!
Hoodlifter, during their stagnant 90's, Japan's unemployment rate was 3% (that's three percent). This was achieved at the same time that they had one of the lowest income inequalities in the world, universal health care, low infant mortality, longevity and a position high on the charts on every important measurement you might think of. As I understand it, their problems were with liquidity and not too much government spending.
Krugman's point has always been that Japan skimped on the stimulus when it would have made a difference.
Battle of the selected "experts" and spin-meisters, all alchemists noisily conjuring competing portents out of the non-science of economics.
Outlaw dogma economists got us into this mess with lowered taxes on the wealthy and corporations, greedy manipulations of the markets, and starving any protections we had against the speculators.
It's time to change course.
Ah, the CBO. Dont we love reports from these guys. Not mentioned in this post (so I will mention it) the economy is expected to grow 2% this year and 1% next year. Wow. real growth there.
What else is supposed to grow? Taxes. By 30%. What else did they report? That actual unemployment is 10% not in the 8% range that liberals want to show so Obama can get re-elected.
The unemployment number will be lied about until November more than any number in the election. And if the republican candidate is too stupid to expose liberal math, may God have mercy on this nations soul. Just pathetic.
outlier: You must be using that leftist math to calculate Japan's unemployment rate in the 90s. For that decade it started out at little over 2.0% and ended the decade at a little over 4.5%. During that same period the Government Debt to GDP ratio increased in a direct coorelation:
http://www.tradingeconomics.com/japan/unem…
I can do math and read too, Sherlock. I cited average unemployment figures for the 90's, although they prevailed until 2010. Here is the first sentence of the article you linked:
"The unemployment rate in Japan was last reported at 4.6 percent in December of 2011. From 1953 until 2010, Japan's Unemployment Rate averaged 2.60 percent reaching an historical high of 5.60 percent in July of 2009 and a record low of 1.00 percent in November of 1968."
You are going to have to do better. The chart in the link starts in January 2010. The financial meltdown is world wide. Perhaps that explains their jump in unemployment. More analysis is needed to affirm that, but I won't rely on you to do it.
Your still striking out with that head of yours. If you look up at the top of the chart you can set it at any year you choose. I ran it from 1990 to 2000 for both unemployment and Debt to GDP. Just let me know if you need any help figuring it out.
You still come up with about a 3% average for the 90's Sherlock. Compared to our rates they look pretty good, although from all the Japan bashing going on here, you wouldn't know it.
Try again.
The US economy is 70% consumer spending driven.
The only way out of the recession is a return of consumer spending. That is it.
Think about it. The gov't is a consumer (the biggest in the land) and any money taken in taxes shoots back out into the economy imediately.
Any cut in gov't spending cuts consumer spending because the gov't is a consumer (the biggest in the land).
Now throw a gov't worker out of a job and then put them on the unemployment roles and the savings is small plus it scares the hell out of all the workers they come into contact with. That household obviously cuts back drastically but it causes other friends, neighbors and other to get a scare and also halt spending.
Well, we certainly attracted a bunch of trolls today, didn't we. That stimulus that "didn't work" was half tax cuts and people spent that money and it kept the Bush recession from being worse than it was. The problem is that Bush's recession was hell-bent on getting worse when President Obama took office and with the midget minds in the ReTHUGlican party, we will have a much longer recession than we would have had with intelligent people working TOGETHER for the country and not for their corporate masters.
At least maybe Citizen United may make the THUGS realize that it works both ways and they can be the subject also of unrented attacks and isolated facts as Romney has done to Grinch-ich except with Grinch-ich, all you have to do is mention the truth and he comes off as an economy-terrorist! How can anyone even think of voting for "lunar-base" Grich-ich. That wasn't done in Kennedy's time for peanuts and there is no sign that anyone in the THUG party has a wide vision of anything except who gives them the most money and the Koch's wish list.
Outlier, sweet neighbor, you must stifle your impulse to try to educate the impervious trolls. Like so many of the half of the 99% who bother to vote, they may well be good folks, kind neighbors, loving parents, but they have been played for fools and used as tools.
They will admit their toolishness shortly after the next ice cap sends glaciers into the valleys south of Kansas City, as it has before and surely will again.
Silver, I am not trying to educate them. I know what a Sisyphean task that is. I just want to refute their lies for other readers who are open to the truth. Can't let them get away with their b.s.
couldn't be better, can i rent your crystal ball? i've always wanted one!
Doctors make a larger % of the 1%ers than bankers?! Nah, can't be???
Wait a second...I want some FAIRNESS! I want the playing field leveled! Even though i didn't do all the studying and sacrafice because i wanted to party and even though i didn't do more and more and more school and work so hard...i still want to be able to prescribe myself meds! I should be able to do anything a doctor does just like even though i'm not a wall street banker or broker i should be able to have the same information access and know-how as they do!
"Maverick, I want some butts!" (and some fairness!) who cares if you're a doctor?
government job pay didn't help Amazon's sales....D'oh! Tiiiiibbbbberrrrrrr!!!!!
I'll repeat myself from a previous thread about the Keystone pipeline. If anyone claims project X or stimulus Y will create Z jobs, you can safely assume they are pulling the numbers out of their ass. The world is too complex. That should go doubly for the CBO's predictions.
"Which wingnut is going to be first in mentioning the downturn in FDR's first and and part of second term?"
1946 would be more illuminating, IMO. Government spending nosedives, and the world doesn't end.
"The only way out of the recession is a return of consumer spending. That is it."
Real consumption: http://research.stlouisfed.org/fred2/serie…
Note the all time high.
"Think about it. The gov't is a consumer (the biggest in the land) and any money taken in taxes shoots back out into the economy imediately. "
What would that money, and the resources it could buy, have done had the government not taken it?
TANSTAAFL
Superbowl Party budget considerations:
Beef - up 60% over last 4yrs
Wings - up 39% over last 4yrs
Tortilla Chips - up 43% last 4yrs
Tomatoes up 10% last four years (i guess tomatoes are in Ro-tel for the cheese dip?)
keep printing them dollars! keep the inflation tax going!
Hoodlicker, can you stop posting in this thread so much? It's boring reading the same crap over and over and my 'dislike' reflex is worn out.
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