300 Economists Warn Congress

[TampaYankee]

300 Economists Warn Congress: Don't Kill Growth And Jobs In The Name Of Deficit Reduction

First Posted: 09-16-10 01:06 PM | Updated: 09-16-10 01:27 PM

Arthur Delaney arthur@huffingtonpost.com | HuffPost Reporting

A small army of economists warned Congress on Thursday not to focus on deficit reduction instead of job creation or else risk a 1937-style double-dip recession.

"History suggests that a tenuous recovery is no time to practice austerity," says a statement signed by more than 300 economists and policy experts. "In the Great Depression, Franklin Roosevelt's New Deal generated growth and reduced the unemployment rate from 25 percent in 1932 to less than 10 percent in 1937. However, the deficit hawks of that era persuaded President Roosevelt to reverse course prematurely and move toward budget balance. The result was a severe recession that caused the economy to contract sharply and sent the unemployment rate soaring."

Democrats in Congress have had 1937 in mind since March 2009. "We're not going to let it happen again," vowed House Speaker Nancy Pelosi (D-Calif.) at the time.

Nevertheless, deficit hawks dominated the debate in Congress this summer as Democratic leaders struggled to reauthorize a series of programs created by the 2009 stimulus bill. Pelosi and her counterparts in the Senate have had seemingly little choice other than to sacrifice things like COBRA health insurance subsidies and enhanced unemployment benefits to win the support of deficit-hawkish Democrats and moderate Republicans.

"This is about a high road to recovery versus a low road to fiscal balance," said Bob Kuttner of the American Prospect and co-author of the statement, along with the Center for Economic and Policy Research's Dean Baker and the Robert Borosage and Roger Hickey from the Institute for America's Future. "The proper sequencing is: You get the recovery first, that requires increased public investment. And then the road to fiscal balance is much less arduous because people are working, businesses are investing, and tax revenues go up because you're back in recovery.

"There is also a low road to fiscal balance, where you have austerity and you get the budget balanced at the cost of whacking the real economy."

See original article for more information at: http://www.huffingtonpost.com/2010/09/16/300-economists-warn-congr_n_719469.html

[Guest Conway]

300 Economists Warn Congress: Don't Kill Growth And Jobs In The Name Of Deficit Reduction

First Posted: 09-16-10 01:06 PM | Updated: 09-16-10 01:27 PM

Arthur Delaney arthur@huffingtonpost.com | HuffPost Reporting

A small army of economists warned Congress on Thursday not to focus on deficit reduction instead of job creation or else risk a 1937-style double-dip recession.

"History suggests that a tenuous recovery is no time to practice austerity," says a statement signed by more than 300 economists and policy experts. "In the Great Depression, Franklin Roosevelt's New Deal generated growth and reduced the unemployment rate from 25 percent in 1932 to less than 10 percent in 1937. However, the deficit hawks of that era persuaded President Roosevelt to reverse course prematurely and move toward budget balance. The result was a severe recession that caused the economy to contract sharply and sent the unemployment rate soaring."

Democrats in Congress have had 1937 in mind since March 2009. "We're not going to let it happen again," vowed House Speaker Nancy Pelosi (D-Calif.) at the time.

Nevertheless, deficit hawks dominated the debate in Congress this summer as Democratic leaders struggled to reauthorize a series of programs created by the 2009 stimulus bill. Pelosi and her counterparts in the Senate have had seemingly little choice other than to sacrifice things like COBRA health insurance subsidies and enhanced unemployment benefits to win the support of deficit-hawkish Democrats and moderate Republicans.

"This is about a high road to recovery versus a low road to fiscal balance," said Bob Kuttner of the American Prospect and co-author of the statement, along with the Center for Economic and Policy Research's Dean Baker and the Robert Borosage and Roger Hickey from the Institute for America's Future. "The proper sequencing is: You get the recovery first, that requires increased public investment. And then the road to fiscal balance is much less arduous because people are working, businesses are investing, and tax revenues go up because you're back in recovery.

"There is also a low road to fiscal balance, where you have austerity and you get the budget balanced at the cost of whacking the real economy."

See original article for more information at: http://www.huffingtonpost.com/2010/09/16/300-economists-warn-congr_n_719469.html

If you accept Bob Kuttner's position, you have to believe that government spending will lead us to recovery and that's simply not true or necessary.

Private industry is currently sitting on $1.8 trillion in capital that it will not spend because it is frightened to death of the costs of this regulation mania that the President and Congressional Democrats have been on for the last two years.

In my own industry (financial services) and my own company, our income statement is doing very well. However, we won't undertake the expansion projects that will create jobs until we understand the cost of the new regulation recently passed by Congress.

If the Democrats in Washington would be smart enough to make this recovery about jobs (real jobs, private sector jobs) instead of about grinding an axe against business, they could win the voting public over for 20 years to come.

The Tea Party is succeeding because middle of the road America is tired of all of the nonsensical bullshit of the Keynesian economic policies of this administration and Congress.

[TampaYankee]

If you accept Bob Kuttner's position, you have to believe that government spending will lead us to recovery and that's simply not true or necessary.

What is your understanding of the cause of the end of the Great Depression?

Why do you believe that the serious refurbishment and expansion of the American infrastructure system (highways, bridges, transportation systems, water, sewer, natual gas pipe lines. etc.) won't create jobs and a long-term contribution to the American economy?

Private industry is currently sitting on $1.8 trillion in capital that it will not spend because it is frightened to death of the costs of this regulation mania that the President and Congressional Democrats have been on for the last two years.

I've seen this statement made several times. Granted you want to know your costs so you can gauge your profitability, generally. However, I'd be more inclined to give the above argument more credence if it were presented with specifics. Until I see them, I'm inclined to believe that the reason all that money remains on the sidelines has more to do with lack of demand.

In my own industry (financial services) and my own company, our income statement is doing very well. However, we won't undertake the expansion projects that will create jobs until we understand the cost of the new regulation recently passed by Congress.

Without getting too specific, can you give an idea of the general types of projects that you refer to for which there is significant demand today that regulation uncertainty is undermining?

If the Democrats in Washington would be smart enough to make this recovery about jobs (real jobs, private sector jobs) instead of about grinding an axe against business, they could win the voting public over for 20 years to come.

I agree that the Democrats efforts at job creation have been 'compromised' at best. That includes Obama too. I also recognize that the GOP did nothing to really address the problem at all. They chose to stand behind their party dogma, come hell or high water. After all, if the country fails it will be the Democrats in power who are held responsible. Some real American statesmen in that bunch.

The Tea Party is succeeding because middle of the road America is tired of all of the nonsensical bullshit of the Keynesian economic policies of this administration and Congress.

Honestly, most Americans don't know what Keynesian economic policies are.

What the are is pissed. Pissed that the economy fell in a big hole. (Who was responsible for that?) They are pissed because the government didn't come together to effectively fix the problem. (Is there one party to blame for that? No. But it is clear that one party had no interest in helping the governing party solve the problem.) They are pissed because there has been a lot of misinformation promulgated and frankly much of the population has bought into lies and half-truths. Not seeing coherent problem solving coming from Washington they have become pissed with Washington. There is a very strong anti-encumbent mood in the country. It is not unwarranted. Both parties play games. Individual members of congress and groups of members play games. It's all about politics and the country is all about solutions. That is why they are pissed.

[MsGuy]

"Why do you believe that the serious refurbishment and expansion of the American infrastructure system (highways, bridges, transportation systems, water, sewer, natual gas pipe lines. etc.) won't create jobs and a long-term contribution to the American economy?"

Ty, I honestly think way too much of the stimulus money went to propping up unsustainable state and local spending in disfunctional places like Cali and NY. Did Cali or NY or Illinois and the like use that grace period productively to deal with their problems or did they just push hard decisions off one more year?

This may sound strange coming from a lifelong liberal Dem like me, but I'm sick of folks who measure progress on social problems by how much money is lavished out on public bureaucracies. Some of my fellow Dems make Tea Party types look responsible.

[TampaYankee]

Ty, I honestly think way too much of the stimulus money went to propping up unsustainable state and local spending in disfunctional places like Cali and NY. Did Cali or NY or Illinois and the like use that grace period productively to deal with their problems or did they just push hard decisions off one more year?

I can't support all the fiscal choices that some states make. Some states and municipalities are disfunctional. However, if you are saying the way to solve those problems is to fire teachers, police, and fireman and close schools and fire houses across the nation then I remain to be convinced that is either good for the country or for those states. Stimulus money ought to be focused and maybe it was not focused well enough. I tend to believe it wasn't and I have faulted Democrats for that.

I still do not believe that is an argument for denying focused infrastructure projects as a means for short and medium term job creation and long term benefit to the national commerce infrastructure.

This may sound strange coming from a lifelong liberal Dem like me, but I'm sick of folks who measure progress on social problems by how much money is lavished out on public bureaucracies. Some of my fellow Dems make Tea Party types look responsible.

You have no argument from me. However, some things cannot be done without money. Job creation is one of them. Somebody has to finance it -- either business or government. And government is not permanment source of jobs, only a spark or temporary bridge over some rough patches when business fails to meet the need, and then as a partial solution. When goverment spending is necessary it is always preferable that it result in lasting benefit to the country rather than make-work unemployment programs with no lasting benefit beyond those programs, even though the latter maybe called for in the most difficult times.

[Guest Conway]

I have to agree with Ms. Guy on this point. The "stimulus" approved and doled out by this administration has been far too focused on expansion of the social welfare net versus funding real restoration projects that create real jobs.

This crisis is clearly about jobs. Yet, this administration has clearly exhibited a notion that it has no idea how to go about creating jobs.

If you want an example of how badly this project has gone, look no further than this "stimulus project" in California that created 55 jobs at a cost of $2MM per. The Obama administration calls that project "stimulus". I call it a government boondoogle.

http://www.businessweek.com/ap/financialnews/D9I9MO300.htm

The difference between our current situation and the projects of the New Deal is that the projects of the New Deal created an infrastructure that had not previously existed while the purpose of a jobs related stimulus now should have been to fix a broken infrastructure that has not been properly maintained over time.

Even of consideration of that infrastructure need, far too much "stimulus money" is going to ridiculous projects like this:

http://www.cnsnews.com/news/article/75198

rather than on useful job creating projects.

The presence of politics has also played an insidious role in the stimulus package.

As an example, the "bailout" of GM could have taken place in the Bankruptcy Courts at no cost to the US taxpayer (as could the bailout of Chrysler). In the Bankruptcy court, creditors could have been crammed down on their claims to achieve exactly the end result that we have today and it would not have cost the US Taxpayer a dime.

Yet, the administration chose to spend billions of taxpayer money to protect the financial interests of union pensioners who would have been treated as unsecured creditors in a Bankruptcy action. They were treated as a priority class while the little old ladies holding Chrysler bonds, who should have been entitled to something, were wiped out completely.

The problem that this administration is that it governs by headline rather than by detail.

I'm voting with the Tea Party this fall. I want accountability back in my government.

[TampaYankee]

This crisis is clearly about jobs. Yet, this administration has clearly exhibited a notion that it has no idea how to go about creating jobs.

If you want an example of how badly this project has gone, look no further than this "stimulus project" in California that created 55 jobs at a cost of $2MM per. The Obama administration calls that project "stimulus". I call it a government boondoogle.

http://www.businessweek.com/ap/financialnews/D9I9MO300.htm

The difference between our current situation and the projects of the New Deal is that the projects of the New Deal created an infrastructure that had not previously existed while the purpose of a jobs related stimulus now should have been to fix a broken infrastructure that has not been properly maintained over time.

Even of consideration of that infrastructure need, far too much "stimulus money" is going to ridiculous projects like this:

http://www.cnsnews.com/news/article/75198

rather than on useful job creating projects.

The presence of politics has also played an insidious role in the stimulus package.

I agree with much you say. There was too much politics involved. Obama gave Congress too much leeway in crafting the bill. Not enough was targeted on infrastructure, too much on questionable items. There ought to have been more accountability on 'bang for the buck' job creation quotas. Your examples are proof of that. Obama deserves a good measure of responsibility for that.

I part ways with you on the auto bailout. I won't relitigate that here as it is past, as is the unpaid-for Iraq war and Bush tax cuts and ...

I'm voting with the Tea Party this fall. I want accountability back in my government.

Good luck with that. I suspect if successful then you will get a lot more than you bargain for. Time will tell.

[JKane]

I LOVE how people bring up $800,000 NOT $800,000,000--or even 1 Million fucking dollars--for a program to encourage people to do something that may be a cheap way to prevent the spread of STDs as if it's a bad, horrible example of gov't gone wrong.

Well, here's the pushback on the BULLSHIT that the puritanical and vaguely racist coverage deserves from every corner--but is only getting on an escort review board's politics forum.

In sub-Saharan Africa, genital washing has been theoretically proposed as a way to reduce STD and HIV incidence. Lack of circumcision in men may be a risk factor for development of chancroid, a common cause of genital ulcer disease in Africa. Genital ulcer disease appears to be a risk factor for contracting HIV. Health advocates suggest that education about postcoital and precoital washing with instructions on how to clean the area beneath the foreskin of the penis might be one way to reduce the incidence of STDs in east, central and southern Africa, where male circumcision is less common and genital ulcer disease more common than in west Africa.

--O'Farrell N. Soap and water prophylaxis for limiting genital ulcer disease and HIV-1 infection in men in sub-Saharan Africa. Genitourin Med 1993; 69:297-300.

----It's still under study, there are some conflicting views, but that's the point, a STUDY to see if something almost everybody has access too can lessen the chances of STDs.

I think it is shameful that somebody who participates in our subculture would further the belief that anything which may prevent an STD (especially AIDS) spreading is bad, especially for a measly $800k to serve a hard-hit subgroup!

But hey, let's instead deride the government for funding research in an area that directly benefits US, and leave all medical research up to private pharmaceutical companies so we can get 3 more erection pills and another pill for restless leg syndrome! Forget unprofitable public health initiatives!

[JKane]

I'm voting with the Tea Party this fall. I want accountability back in my government.

Accountability and the teabaggers in the same sentence is an oxymoron. Look at O'Donnel's finances, or Palin's half-assed half-term of service to her state.

Look at teabaggers not getting called on open racism or stating that violence is the answer if they don't get what they want in the election.

Look at their Republican puppet-masters' 10 or so years of leadership of most or all branches of gov't that exactly coincided with getting us into this mess. Putting THEM *back* in control of the majority of the 3 branches of government is taking OUR country BACK HOW, exactly?

Oh, wait, I get it, you obviously can't mean that; you must mean white Christian America taking itself *back* from uppity educated Negroes! Extra ironically, BY ANY MEANS NECESSARY!

[TampaYankee]

I LOVE how people bring up $800,000 NOT $800,000,000--or even 1 Million fucking dollars--for a program to encourage people to do something that may be a cheap way to prevent the spread of STDs as if it's a bad, horrible example of gov't gone wrong.

I think it is shameful that somebody who participates in our subculture would further the belief that anything which may prevent an STD (especially AIDS) spreading is bad, especially for a measly $800k to serve a hard-hit subgroup!

I don't fault anyone for raising questions about programs which seem questionable at first glance. Also, I've also been around long enough to know that first glances don't always tell the story. I don't question the motives of anyone participating in our forums. Even if I disagree I recognize the right for others to have differing opinion for reasons which may be quite valid but which I value differently.

Also, I do not buy into the fact that because the cause is noble then the methods are beyond question. Money and effort thrown at problems without a thoughtful plan and practice and realistic goals is just wasted money that could have been put to better use for the same end.

Let's remember to question the issues and not our values. We ought to be able to keep the discussion on facts and propositions and not on personalities. I value the opinions of intelligent and informed people that I differ with because I often learn something even if it doesn't persuade me to change my mind. And I have been persuaded to change on more than one occasion.

[TampaYankee]

Accountability and the teabaggers in the same sentence is an oxymoron. Look at O'Donnel's finances, or Palin's half-assed half-term of service to her state.

Look at teabaggers not getting called on open racism or stating that violence is the answer if they don't get what they want in the election.

Look at their Republican puppet-masters' 10 or so years of leadership of most or all branches of gov't that exactly coincided with getting us into this mess. Putting THEM *back* in control of the majority of the 3 branches of government is taking OUR country BACK HOW, exactly?

Oh, wait, I get it, you obviously can't mean that; you must mean white Christian America taking itself *back* from uppity educated Negroes! Extra ironically, BY ANY MEANS NECESSARY!

I think it is a mistake to paint all tea-baggers with this broad brush. You point out some stark examples of what I term right-radicalism tarnished with individual failures of character or vision -- my opinion. Also, certainly there are pockets of unsavory attitudes represented in the tea party. That is to be expected. The tea party is upset with what they see as the failure of the establishment (including both parties) to solve problems and to represent the individual people over special interests. These unsavory groups are upset with the establishment that does not embrace their views. It is only natural that dissatisfaction with the establishment would attract various anti-establishment causes. It is not surprising that some individuals overlap. I do not believe these examples represent all or even most tea-baggers -- just the most vocal.

What is disturbing to me about the tea-baggers at large is that they are so upset about present issues that they are willing to embrace such crazies to wrest change from the establishment. They ought to be able to find better leaders.