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

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."

Click HERE to download a PDF of the report.

Comments

[benjaminlagrone]

04:59 PM on 09/17/2010

I keep laughing at the GasHuffington's liberal audience tenuous grasp at economics. Los Angeles created a whopping 55 jobs with $111 million of stimulus money. I wonder what would have happened if that same amount had been left to the private economy. Oh right, conservatives would have used spent it on baby meat. YUM!

[texfly]

03:30 PM on 09/17/2010

I just love the idea of $10-20B stimili for creating infrastructure jobs. I'm willing ti bet that $2 trillion applied to new energy will create over 50 million jobs over the spending period. Let's get started.

The economies that have ENERGY are the only ones who can create wealth and sustain their population.

[playon]

01:55 PM on 09/17/2010

When was the last time that conservatives actually listened to educated people?

[dj5850]

12:05 PM on 09/17/2010

To AndyWright./..whatever...who commented on my post earlier...."now we're supposed to believe that they now care about the babies"? Your comment: "what is that supposed to mean"?

I will be happy to let you know what it means.....this farce that the Rethugs, all of a sudden care about what our children will pay later....hell we're still paying for things from our grandparents age. Now you care, but you hyprocrites didn't say a word about Bush's unpaid for wars that are still racking up trillions of dollars...daily, but NOW that Obama is president, you're sooo worried about what our children and grandchildren will have to pay. Remember your hero Cheney said, that "deficits don't matter". PLEASE give a FKING break with that nonsense that only a gullible, single digit IQ rethug would fall for.

[Aikaterina]

10:24 AM on 09/17/2010

The push for deficit-debt reduction is worthwhile, but not at the expense of job-creation and stabalizing the economy first. Were Congress to cut all unemployment benefits, welfare programs, and not promote job growth, continue funding the stimulus, there won't be enough folks able to pay any taxes, which will cut short future earnings. People on unemployment or welfare don't pay taxes. People working at jobs do.

1. Extend tax cuts, subsidies and credits ONLY to those who create, invest in, expand and KEEP business operations in the US, eliminating them for those who move headquarters, plants, service operations (other than sales forces) off-shore.
2. Require banks (especially those who got TARP bail-outs) to resume prudent lending to credit-worthy businesses and individuals, rather than diverting deposits towards speculative investments/products.
3. Implement a quid-pro-quo trading policy with all partner nations, so their tariffs, quotas and restrictions on our exports are met with the same on their imports here. Stop the flooding-dumping of cheaply-made goods into our market, putting American-owned businesses at a competitive disadvantage.
4. In light of health care mandates, rescind the anti-trust exemption insurers use to monopolize markets and fix prices arbitrarily (needlessly) high, so there's more choice for businesses-consumers, and to keep costs for benefits from soaring.
5. Improve, modernize our infrastructure to increase safety and efficiency. Our roads, bridges, levees, electrical grids are in disrepair and outdated. The nation needs high-speed broadband accessibility throughout.

[LadyAnn]

10:21 AM on 09/17/2010

Right now I'm tearing my hair out over Democrats like Evan Bayh who say that now is not the right time to let the Bush tax cuts expire on the wealthy because they are the ones who make hiring decisions. That money goes to their savings and not to hiring people. Why are there so many dems that call themselves blue dogs but instead cater to their corporate masters? Bayh is what used to be called a Rockefeller Republican, he is not a democrat at all.

[bilmardre]

09:59 AM on 09/17/2010

We know that continuing the current tax rate for the wealthiest 2% will adversely effect the deficit.
IS IT TRUE OR NOT that continuing the current tax rates for the wealthiest 2% will NOT help economic growth.
If this is true, then why will NO talking head on TV call out anyone when they get on TV babbling about letting the tax rate expire for the wealthiest Americans will hurt economic growth?

[proudliberal200]

04:35 PM on 09/18/2010

Well think about how the economy was under President Clinton and then how it was under Bush. We had jobs under President Clinton and I know because I was working during both Presidents tenures. A lot of people just aren't educated on how a lot of corporations got tax cuts and still hid assets, low balled on wages and benefits and still outsourced jobs. Think about how many jobs were lost under Bush when the tax cuts were in place. How many people outsourced jobs? Clinton left with a surplus and millions of jobs created. They dont want people to know it because then it would stomp the conservative argument into the ground on giving tax cuts to big business.

[politicalguy94]

09:58 AM on 09/17/2010

Three hundred economists have said not to constrain job growth to reduce the deficit. A majority of Americans want the government to focus on jobs over the deficit. Pelosi herself said she didn't want fiscal austerity to hamper economic recovery.
Call/email the Democratic representatives and senators and tell them about the 300 economists' opinions, and demand that they stand up and push jobs legislation, and if deficit hawks and Republicans prevent the bills from passing, Democrats must force repeated votes on the bills and frame the votes to the deficit hawks, Republicans, and the public, as a choice between jobs and no jobs! 300 economists support jobs over deficit reduction, and a majority of Americans support jobs over deficit reduction; now all that is needed is for Democrats to use this support to push jobs bills, and cast any representatives/senators that oppose them as voting against Americans' interests.

[11111]

09:43 AM on 09/17/2010

And every study says people in socialist countries are the happiest.

[iskra]

10:00 AM on 09/17/2010

We should poll those in 'Republican' states that have low taxes, small government and no regulations: Check those in Somalia

[dawgspiel]

10:14 AM on 09/17/2010

They can't take polls there. The natives are too busy ducking bullets.

Where's a cop when you need one? In France!

[Jimbo24]

09:25 AM on 09/17/2010

No, lets kill the children's chance of growth and jobs and sell them out to China. Its time for the adults to grow up and take their medicine so that we can get back on track. If in a worst case scenario it takes high unemployment and slow growth to get back to a responsible govt. that is the price that needs to be paid for the dem and repubs fiscal transgressions. I for one am greatly underemployed because of the economy but am willing to suffer longer if I know it will be for the good of the future of the country.

[markg1956]

09:24 AM on 09/17/2010

I'm sorry kill what jobs growth?

[WOODSTOCKER51]

09:20 AM on 09/17/2010

THE RETHUG SOLUTION:


......."TAX BREAKS FOR THE RICH"....

[Arrech]

09:20 AM on 09/17/2010

In the wake of the Delaware primary, everyone is talking about the Tea Party and momentum. I am focused on three numbers: 15, 5, 10.

We've got 15 races within 5 points. Republicans only need 10 to get their grubby paws on the Senate. That's it. 10 wins, and Republicans will be living their dream. Mitch McConnell in charge. Insurance companies in control. Senate committees investigating President Obama all the way from his birth certificate to "death panels." Tuesday's primaries were a stark reminder of how hypermobilized the radical right is.

If you haven't gotten active yet, now's the time, folks. My friends at the DSCC have a plan to stop a GOP takeover, but they need to raise $213,375 in grassroots donations by midnight Saturday to defend Barbara Boxer, Patty Murray and the rest of our Democratic candidates. Your gift now could be what keeps Mitch McConnell out of the leader's chair.

https://dscc.org/give?donate_page_KEY=8873&amount=x

[dpavsek]

09:32 AM on 09/17/2010

I agree with the statement and have contributed, but please don't pass it off as your own. I received this statement in an e-mail from the dscc attributed to Bill Clinton.

[draven646]

09:09 AM on 09/17/2010

and there will be '300' economists who will say that the 'deficit is out of control' and unrestricted Government meddling and expenditure will doom us all - round and round the merry go round.....

[ACLU Card Carrier]

09:04 AM on 09/17/2010

We incessantly hear from the same people about the impending "bankruptcy" of Social Security, Medicare, even the United States itself and the burden that public debts will "impose on our grandchildren”, or about "unfunded liabilities" supposedly facing us all, blahblahblah, ad nauseam.
 
All of this forms part of one of the great misinformation campaigns of all time. 
 
To focus obsessively on cutting future deficits is a path that will obstruct, not assist, what we need to do to re-establish strong growth and high employment.
 
Private borrowers can and do default. They go bankrupt (a protection civilized societies afford them instead of debtors' prisons). 

With government, the risk of nonpayment doesn’t exist. Government spends money (and pays interest) simply by typing numbers into a computer. Unlike private debtors, government doesn’t need to have cash on hand.  Since it's the source of money, government can’t run out.
 
It's true that government can spend imprudently, (too much spending, net of taxes, may lead to inflation, often via currency depreciation), though with the world in recession, that's not an immediate risk.
 
Wasteful spending (like on unnecessary military adventures) burns real resources, but no government can ever be forced to default on debts in a currency that it controls.
 
Public defaults happen only when governments don't control the currency in which they owe debts (as Argentina owed dollars or as Greece owes Euros), but for true sovereigns, bankruptcy is an irrelevant concept. 

[gerald4]

10:44 AM on 09/17/2010

Dear ACLU Card Carrier:

Why can't the US government just buy some more paper and print more US dollars (faster and faster) to pay our expenses like Mexico prints pesos?

Because every time that the USA prints fresh dollars or US Bonds, the value and buying power of each printed dollar reduces proportionately. One US Dollar that would buy about 8 Mexican pesos in 1960 can now exchange for as much as 15,000 of the 1960 Mexican pesos today. This is equivalent to about 187,500% inflation over that period. A $2.00 USA loaf of bread would then cost $3,750.00 if the USA implemented Mexican type economic monetary policies, and then $4,000.00 next week, and $5000 the week after.

Why do we have to borrow US dollars from foreigners, and not our own financial institutions?

Because the Chinese, Indians, Pakistanis, and Brazilians are very industrious people that have created a continuous flow of incoming US paper dollars that they earn from US importers/retailers for making the things that US citizens consume.

Only small percent of these freshly printed paper T-Bills, US Bonds, etc. are bought by US citizens and US organizations at the FED auctions.