Why Budget Cuts Don't Bring Prosperity

The New York Times:

Washington

Remember the German economic boom of 2010?

Germany's economic growth surged in the middle of last year, causing commentators both there and here to proclaim that American stimulus had failed and German austerity had worked. Germany's announced budget cuts, the commentators said, had given private companies enough confidence in the government to begin spending their own money again.

Read the whole story

Comments

[miltonc4l]

01:38 PM on 02/26/2011

This author is completely clueless. GDP includes government spending, so naturally, cranking government spending will have a positive effect on GDP (there's your entire fake recovery). However, when that government spending is borrowed or printed, the game simply cannot last forever. Right now, the actions of the Federal Reserve are devastating the "real" productive economy AND putting the squeeze on the poor and middle class . . . all for the sake of keeping bankers rich and allowing government to go on this debt spending binge. Commodity prices going up in a stagnant wage environment. Business margins get wrecked, and the poor and middle class have to spend an ever increasing % of their dwindling incomes on basic necessities.

This person is lauding the effects of stimulus on our "growth" when we had to BORROW $1.5T (10% of our GDP) to achieve 2-3% growth. It's a joke. It's like having your personal income cut from 60K to 55K, then putting 6K on the credit card and telling yourself you actually got a raise. Insane!

Step #1 to a real economic recovery is to force the big banks to return to fair and accurate accounting practices (for most of them that just means admitting that they are in fact bankrupt). Only then can we lay the groundwork for sustainable recovery. The current debt-binge and commodity bubble is the same sort of fake growth we had with the housing bubble, and when this one pops, we're screwed.

[swj]

10:23 PM on 02/23/2011

We are living in a greed driven society.Nothing will ever change.No matter who is in charge.
Suck it up and get used to it.Ultimately the Koch brothers and their greedy friends always win.
It's the American way.

[stape45]

02:55 PM on 02/23/2011

Whatever the GOP recommends the Dems do, the opposite should be done, because the GOP agenda is all about Obama administration failure.

[mhoff]

01:48 PM on 02/23/2011

So let me think about this in my conservative hat:
Based upon recent election trends...

If the economy is bad in 2012, (+) for me politically
If the Democrats are demoralized in 2012, (+) for me politically
If the national deficit remains a major issue in 2012, (+) for me politically

Then, why wouldn't I shave the budget to claim fiscal austerity, and target programs that mostly affect people who vote Democrat? I can "cut" the budget to please my base while demoralizing the Democratic base, simultaneously cutting programs support for other entities I view as opponents like NPR, unions, planned parenthood. Finally, I can make a showing of fiscal restraint by trimming (less than %5 at best) the budget while not really making real reforms. Real reform would probably hurt. Especially how other Republicans have suggested they do it before. (No medicare, just vouchers for private insurance. No medicaid period. No more post office, dept. of Education. No nutrition programs for women & children) And that would cost votes. So to go about it this way, to clean up the budget by defunding things Democrats like, could be the best available strategy for Republicans winning in 2012. Worst case scenario, the economy tanks from the reduced economic activity these programs cause (poor people buying food and getting help paying their rent), and The President, historically, will suffer most for it. Seems like a good political plan for Republicans. Still figuring out how it creates jobs though.

[Hoosierbrad]

01:47 PM on 02/23/2011

Republicans do not care! This is their way of starving the beast! If it results in hardship for the poor and middle class, they say, "so be it!"

[thepoliticalcat]

02:40 PM on 02/23/2011

That's exactly what John Bo(eh)ner says.

[Zadeekah]

01:46 PM on 02/23/2011

The days of prosperity for all or for many are over, kaput, dead, Jack, and nothing is going to bring those days back. What is happening is that some people would like to try to work for a sustainable future when we are much less prosperous and increasingly poor, while others today are more concerned with preserving their piece of the current pie, which is like collecting water in a strainer. The people of Wisconsin have been duped by the Democrats and the unions into continuing to support unsustainable salaries, perks, and pensions for the public workers even as their own salaries and perks and pensions vanish.

[thepoliticalcat]

02:41 PM on 02/23/2011

Fighting over the crumbs while the top 2% are walking away with the whole pie is also not a good strategy.

[SPAIN62]

01:43 PM on 02/23/2011

“Why Budget Cuts Don't Bring Prosperity”

That's not true, GOP budget cuts do bring prosperity, to the top 2%.

[NJProgressiveIndie]

01:32 PM on 02/23/2011

At this point, David Leonhardt, Robert Reich and others are just preaching to the choir. Austerity budget cuts designed to beat down the poor and middle class are as much a part of the GOP/Neo-Con/Tea Party as Christian fundamentalism.

[Paul Sta]

12:51 PM on 02/23/2011

Budget cuts mean nothing to small business expansion and hiring. Except to possibly curb inflation, as food energy and interest rates are sky rocketing.

Jobs and housing, both have been ignored. Massive tax cuts and incentives for small business to expand, stop the foreclosure glut, its already to late, housing will take a decade to recover.

[Binx101]

12:48 PM on 02/23/2011

There are considerable difficulties with this article. The author uses long term trends as the benchmark for analysis while he performs a short-term analysis of his own. Then he glosses over the "budget-cut" otherwise known as "tax-cut" (which is termed as spending in these Fed Budgets) and gives is 4 words.... 4 words.

Economists have argued that rolling taxes back to the Clinton era tax numbers is a safe target - in fact - it's as safe the margin the GOP has been asking union workers to reduce their salaries. Many unions, particularly those in troubled decimated industries, have acquiesced - however - the tax cuts are still in place.

Again ... the article doesn't mention this at all ... but goes into great detail giving a short term opinion about 4 long term global economic fixes, some less than a month old.

Binx101
The Almost Daily Binx
http://binx101.wordpress.com

[Hoosierbrad]

01:50 PM on 02/23/2011

The problem is that our revenues historically have been in the 18 to 19% of gdp, and federal expenditures are near those figures. Our revenues are only 13 - 14% of gdp, and need to be increased to where they belong.

[Binx101]

04:20 PM on 02/23/2011

That is an unambiguous statement of fact, yet our electorate has been distracted with seemingly insane political competitors vying for their attention by distorting personal issues and conflating fact and fiction, dealing in docudrama and quite often - bold faced lying to their constituents because they are, in actuality, on the payroll of citizen corporations.

This will be memorialized in history as a period of corruption that is almost as inconceivable as a meek wallpaper hanger inspiring genocide.

We as an electorate better stop dealing with elected officials and treating elections as a party driven popularity contest and have the backbone to think of our neighbors as well as our own selfish interests. We need to challenge contenders on facts, not fiction.

Binx101
The Almost Daily Binx
http://binx101.wordpress.com

[vippy]

12:41 PM on 02/23/2011

Geez, raise the taxes on the rich and the corporations and they won't have a budget problem.  Just look what corporations have to pay in other countries, we are one of the lowest.  And we don't have an economy if the rich don't start paying their due taxes but everyone wants to squeeze the littlest person, who has to chose between a loaf of bread or gasoline to go to work. Just makes no sense at all.  Let us just shoot the middle class and poor so the rich can have it all.  Will they be satisfied then?

[dresdengirl]

12:48 PM on 02/23/2011

Good one, vippy.
Fanned, (thought I had done that a long time ago)

[Decorina]

12:59 PM on 02/23/2011

Who will make their lattes, mow their lawns and care for their children? Who will drive them around? You have not thought this through. We can't dispense with ALL the little people - the rich depend on them to perform certain functions for which they are ill-equipped. Maybe a law to ensure that just enough of us survive to take care of them so they can continue in the style to which they have become accustomed. Anything less would be cruelty to rich people.

[nypapajoe]

12:23 PM on 02/23/2011

"A huge share of the nation's economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244". Now that the wealthy have employed the republicans to lobby for them we have to unite to end the the demise of our economy and middle class! How much more money or tax breaks do they need to live day to day!

[thepoliticalcat]

02:45 PM on 02/23/2011

$27 million per household per annum works out to roughly $2.X million PER MONTH. Even WITH a mortgage and car payments, that's an awful lot of "discretionary income." Most people would be happy to live on $2 million for 20 years.

[XCellKen]

08:19 PM on 02/24/2011

I think you meant mortgage(s) and car payment(s). You do realize the super rich have numerous houses and cars?

[ewillies]

12:10 PM on 02/23/2011

It does not matter what Conservatives say. When we are in an economic crisis where businesses are unwilling and/or unable to spend government must to ensure the economy continues to turn. Inasmuch as all the evidence that proves this point under Roosevelt, Nixon, and Reagan, Conservatives continue to push snake oil. Reagan clearly used backdoor Keynesian Economic policies under the guise of unfunded tax cuts. Their economic doctrine is their religion and as such does not require proof. Their faith in it suffices.

Unfortunately I do not believe that the more read Conservatives believe their own rhetoric. Their reason for constantly requesting more tax cuts and budget cuts more so now than ever, is directly related to their fear that as Americans become cognizant of the wealth disparity they will start the necessary move to tax wealth equitably. Whereas the working man pays up to 36% of his wages in taxes, the wealthy investor can watch his capital gains taxed at just 15% while drinking tea at his pool. While corporations get treated as more than individuals with respect to their ability to contribute to political campaigns, many pay little if any taxes.

It is Class Warfare. It is Class Warfare by the wealthy & corporations against the middle class and it is not by happenstance.
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http://bit.ly/aB9Zkz

[vu jade]

12:34 PM on 02/23/2011

It doesn't matter what Democrats say...big government is a tax. Give the private sector incentives to create jobs, innovate and produce and there will be prosperity.

[ewillies]

12:38 PM on 02/23/2011

My quesrion to you is that why would we do what we did before, lower taxes dramatically on the wealthy (many who got it by certain aberrations in an unfettered capitalist system) when the no employment was created? Maybe you should search "marginal propensity to consume" and see why wealth disparity as we have here is largely causal as our continuous decline.

[Trepasky]

01:06 PM on 02/23/2011

The business problem is lack of consumers/buyers.
There is little other than giving consumers money to spend that will cause businesses to increase jobs.
As it is businesses have increased their productivity over the past 10 years and have idle capacity now. They won't need to hire for quite some time.
While big GOV may be a tax it is the most capable of creating jobs with infrastructure projects like modernizing our public buildings, schools, water and sewer systems.

[Paul Sta]

12:53 PM on 02/23/2011

Todays Democrats are yesterdays Republicans, Reps are just more upfront about their allegance to Corps and big banks. Democrats just lie about it, both parties cower in fear of their true masters.