Fixation on Deficit Threatens Jobs and Recovery
The constant, mind-numbing drone of deficit fears emanating from Republicans and the Wall Street media continues in the wake of Sen. Jim Bunning’s (R-KY) irrational week-long obstruction of an emergency jobless benefit extension.
But as Nobel laureate economist Joseph Stiglitz explained yesterday on CNNMoney.com’s Strategy Sessions a fixation now on the deficit threatens to undermine prospects for economic recovery.
Mike Lillis at the Washington Independent has an excellent piece today on the Republicans’ “deficit crusade”:
Sen. Jim Bunning’s (R-Ky.) recent one-man stand against legislation extending unemployment benefits offered a high-profile airing of a popular GOP message: Deficit spending, in almost any form, will cause more harm than good to a fragile economy.
Standing in the way of the Republicans’ reasoning, however, has been another formidable group: budget experts. Most are urging additional, though temporary, deficit spending as the surest way to tackle the jobs crisis and prevent the economy from slipping back into recession. It hasn’t helped the GOP’s argument that a good number of them are fiscal conservatives.
Lillis highlights a recent joint Op-Ed in Politico by conservative budget economist David M. Walker, president of the Peter G. Peterson Foundation, and Lawrence Mishel, president of the Economic Policy Institute, titled Address Jobs Now and Deficits Later where they write:
A focus on jobs now is consistent with addressing our deficit problems ahead.
As in every economic downturn, federal revenues have fallen steeply because individuals and corporations earn less in a recession. High unemployment also results in higher expenditures for safety net programs, like Medicaid, unemployment benefits and food stamps.
Not surprisingly then, a huge recession can yield a huge deficit. Efforts to put people back to work and help restore the economy, like the recovery package passed last February, can also increase short-term deficits.
Though a concern, most of the recent short-term rise in the deficit is understandable. Furthermore, public spending can help compensate for the fall in private spending, and help stem the pain of substantial job losses.
With more than a fifth of the work force expected to be unemployed or underemployed in 2010, there is an economic and a moral imperative to take action. Persistently high unemployment drives poverty up, makes it harder for families to find decent housing, increases family stress and, ultimately, harms children’s educational achievement. For young workers entering the workforce, the current jobs crisis reduces the amount they will earn over their lifetime.
That’s why we agree that job creation must be a short-term priority. Job creation plans must be targeted so we can get the greatest return on investment. They must be timely, creating jobs this year and next. And they must be big enough to substantially fill the enormous jobs hole we’re in. They must also be temporary — affecting the deficit only in the next couple of years, without exacerbating our large and growing structural deficits in later years.
Announcing his recent report The Budget Deficit Scare Story and the Great Recession (pdf) — which analyzes and refutes the major claims fueling the fearful fixation on the deficit — economist Dean Baker of the Center for Economic and Policy Research (CEPR) said:
In a time when cogent, effective policies are needed to address the suffering stemming from the economic downturn, the tactics of the deficit hawks distract the public and policy makers from the policies necessary to bring the economy back to full employment.
Of course you’d never know it listening to the repetitive, mindless fear-mongering about the deficit by Republicans and conservative pundits, but Americans are way ahead of them on the issue of jobs and the deficit. As we’ve reported here, a recent national Quinnipiac poll showed that Americans of all political preferences, ages and incomes overwhelmingly think reducing unemployment now is more important than reducing the deficit.
