The post Republicans will punt on economic recovery appeared first on Occasional Planet.
]]>The first significant economic figure that came out in the wake of the government shutdown and near collision with the debt limit was the September, 2013 unemployment figures. The economy added 148,000 net new jobs in September, a less than stellar number. Technically, unemployment dropped from 7.3% to 7.2%.
But the real problem has to do with the numbers that lie ahead. These are the figures that in-part cover the time during which the government was shut down. Hundreds of thousands of federal employees were out of work and while most of them will receive back pay, there is no way to create the productivity that they would have supplied had the government been open.
Most humanitarian economists feel that what the country needs now is a stimulus program that will create millions of new jobs in fields that demand more workers: infrastructure, health care, education, and fighting poverty. In 2009, when President Obama had Democratic majorities in both the House and the Senate, he was able to get the American Recovery and Reinvestment Act passed.
The measure provided $787 billion and included additional funding for infrastructure, education, health, energy, federal tax incentives as well as expansion of unemployment benefits and other social welfare provisions.
The rationale for ARRA was from Keynesian macroeconomic theory, which argues that, during recessions, the government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration. Shortly after the law was passed, however, Keynesian economist and Nobel laureate Paul Krugman while supportive of the law, criticized the law for being too weak because it did not “even cover one third of the (spending) gap”
John Maynard Keynes was not just an economist who developed theories to expand growth; he was concerned about the middle class and poor people; two groups that stand to benefit most from the government engaging in targeted spending. His policies are an anathema to present-day Republicans. Members of the GOP state their primary goals to be running a balanced budget and retiring our national debt. However, after Democrat Bill Clinton achieved that goal in the late 1990s , Republicans violated their own principles by lowering taxes so that the government did not have the revenue to run a balanced budget. The Republican mantra is to help the middle class, but they try to do it in ways that do not include job creation, direct transfer payments when needed, and better systems for health care and education.
As we move through fall, 2013, we are in a state of economic stagnation. The shutdown that the Republicans caused took us from moderate growth to a still undetermined level of regression. What we need now, among other things, is a new economic stimulus package.
As the New York Times reports, “While the Fed has been trying to stimulate the economy, fiscal policy has largely worked in the opposite direction, with multiple drags on growth resulting from a payroll tax hike that began in January, the across-the board budget cuts of the so-called sequestration that began in March, and then the partial government shutdown and debt ceiling crisis in October.”
Just as the Republicans were thinking about false numbers instead of real people as they caused the shutdown and debt crisis, they are unlikely to think about American and global citizens to regenerate the economy from the recent troubles. Some of the Republicans may try to trim their sails as they approach the 2014 elections, but their records to date indicate that they do not govern in a way that is helpful to the American people. We must do all that we can to clearly describe past, present and future economic priorities of both parties and hope that enough of the electorate can connect the dots and help us reduce the number of Republicans in Congress post 2014.
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]]>The post Stimulus deserves an A+ despite problems appeared first on Occasional Planet.
]]>The president’s Council of Economic Advisers recent report, The Economic Impact of the American Recovery and Reinvestment Act of 2009: Fourth Quarterly Report, July 14, 2010, is encouraging. By any measure, the $787 billion American Recovery and Reinvestment Act (ARRA) has been successful. Even though it was too small and included too many tax cuts as opposed to direct spending (See progressive economists Paul Krugman, and Joseph Stiglitz for more on these arguments) the Recovery Act has had an extremely positive impact on the welfare of the country. Its success underscores how impressive and effective it can be when taxpayer money is used for the common good, to help improve the lives of the majority of American citizens.
Hopefully, the solid successes of ARRA will encourage additional stimulus spending. As for the deficit, ending the misguided wars in Iraq and Afghanistan, and letting the tax cuts on the upper 5% expire, would free up a lot of money to help the American economy get on its feet. To track ARRA spending in your state or city, go to www.recovery.gov.
Here are some highlights from the report, which you can view in its entirety here:
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