The economic news has been better lately. New claims for unemployment insurance are down; business and consumer surveys suggest solid growth. We’re still near the bottom of a very deep hole, but at least we’re climbing.
... we have a lot of evidence from other countries about the prospects for “expansionary austerity” — and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.”
And do you remember the lavish praise heaped on Britain’s conservative government, which announced harsh austerity measures after it took office last May? How’s that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.”
Which brings us back to the U.S. budget debate.
Over the next few weeks, House Republicans will try to blackmail the Obama administration into accepting their proposed spending cuts, using the threat of a government shutdown. They’ll claim that those cuts would be good for America in both the short term and the long term.
But the truth is exactly the reverse: Republicans have managed to come up with spending cuts that would do double duty, both undermining America’s future and threatening to abort a nascent economic recovery.
BEST COMMENT ON THE ARTICLE:
This is spot on, Professor Krugman. The only thing I would add is that halting the economic recovery is not a bug in the Republicans' plans, it is a feature of those plans. And the reason for this is that Republicans know that the only way they can defeat President Obama in 2012 is if the economy is struggling. And, as Mitch McConnell and other Republicans have made clear, defeating President Obama is their number one goal.
If you think I am being hyperbolic in suggesting that Republicans would purposely try to drive the economy down just to win an election, keep in mind how Republicans behaved in 2009 and 2010 as President Obama and the Democrats tried to pull the economy out of the Bush Recession. Rather than help to create jobs:
* Republicans Eliminated 130,000 Jobs by filibustering the extension of the TANF Emergency Fund, which provided funding for small businesses, non-profits, and local governments to employ people.
* Republicans Obstructed Small Business Aid by filibustering legislation that provides a $30 billion small business lending fund and $12 billion in small business tax breaks. While the Democrats first proposed this legislation in February 2010, they were not able to overcome the Republican filibuster until September 2010.
* Republicans Filibustered the Most Effective Stimulus Available delaying the extension of unemployment benefits on multiple occasions. The Congressional Budget Office and other experts have identified unemployment benefits as the most effective stimulus policy because it puts money directly in the hands of people who will spend it almost immediately on necessary staples like food, gasoline, and rent.
* Republicans Triggered Layoffs of State and Local Public Servants by removing aid to state and local governments from the stimulus bill and filibustering an aid package proposed last summer to avoid layoffs of teachers, firefighters, and police officers. While the private sector has seen job growth throughout 2010, overall job numbers are down because cash-strapped local governments are laying off tens of thousands of people.
* Republicans Obstructed the Appointment of Qualified Nominees for 20 positions in the U.S. Treasury and three Federal Reserve Board of Governors positions, delaying the ability of the Obama Administration to operate at full capacity as it seeks to fix our economy.
In short, Republicans did everything they could to try to prevent President Obama and the Democrats from implementing policies that will allow for a full economic recovery. The result was that the economy continued to struggle and Republicans took the House last November. Now they are trying for a repeat performance.
http://www.winningprogressive.org
Paul Krugman
