Sunday, July 31, 2011

Republicans extend the Great Recession

A group of financial capitalists, represented primarily, but not exclusively by the Republican Party, looted  the banking system  in 2008/2009 and caused the Great Recession costing millions of people their jobs and their homes.  Now the same people are set upon doing it all again.  The all cuts budget imposed by the Republicans will make the recession longer and worse than it needs to be.
Meanwhile, Back in the Real Economy N.Y. Times. Opinion. July 30,2011.
The economy is in trouble, and Washington — fixated on budget slashing at a time when the economy needs more spending — seems determined to make matters worse.
…Indeed, they are bound to worsen if Congress approves deep near-term spending cuts as part of a debt-limit deal while letting relief and recovery measures expire.
We will leave it to the historians to figure out how both political parties, and many Americans, became convinced that austerity is the road to recovery. History provides evidence that it is not, including the premature budget tightening of 1937 that reignited the Depression.
For now, it is clear that the traditional drivers of recovery — consumer spending and residential real estate — have failed to rebound, with the latest report showing consumers extremely cautious about spending on anything and the housing market stuck at its post-bubble lows.
Weak demand leads to slow growth, and slow growth leads to high and rising unemployment, which then reinforces weak demand and slow growth, and so on, in a vicious cycle from which the economy, obviously, has found no escape.

It is a situation that cries out for help from the government, and yet the opposite is happening. As federal stimulus programs from 2009 have ended — including aid to states and infrastructure projects — state and local governments have also cut back, leading to layoffs and less spending on contractors and social programs. The fiscal drag will only intensify in the quarters to come if the near-term budget cuts being called for in the debt limit fight are enacted.
This is not an argument for spending without limits. Given exploding health care costs as the baby boomers retire, budget cuts are unavoidable — but they are not urgent. With the economy weak and interest rates low, austerity makes no sense.
At this point, deep cuts are all but inevitable. But there are sensible things to be done to limit the harm. Budget cuts should be timed to begin as the economy recovers. Congress should vote to extend the federal unemployment benefits program and the payroll tax cut for employees. Republicans will likely oppose even those basic measures. So the White House and Congressional Democrats are going to have to do a better job of explaining economic reality than they have done so far.
Post a Comment
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.