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"It's Unbelievable"

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I had a busy day Wednesday, talking with progressives from various walks of life, from state-level policy advocates to Democrats on the Hill. Folks seem pretty shell-shocked, and I kept hearing the same phrase regarding the current state of affairs: "it's unbelievable!"

  • How could it be that we're a less than a week out from a totally self-inflicted wound to our already frail economy?
  • Why are policy makers spending every waking minute on deficit reduction when jobs are the most immediate problem facing the economy?
  • How did a relatively small group of far right activists totally highjack the national debate?

According to Greg Sargent (citing E.J. Dionne), more people are beginning to buy the most insidious arguments about immediate fiscal austerity -- large spending cuts that kick in right away -- leading to growth, even in the light of the current slowdown, which is itself driven in part by the fading of fiscal support.

As I noted Tuesday night, the UK is a living example of the damage done by premature contraculation, but you don't have to look abroad to see the problem. The figure shows how much diminished government spending has shaved off of GDP growth in the past six months. No wonder employment is in a stall, driven by job losses in the public sector.

2011-07-28-fed_gdp.png

Source: BEA

But those are facts. And facts are not winning. Facts, in fact, are getting crushed. One almost feels embarrassed to raise them in this climate, as if you're impolitely butting your pointy head into the dream world of the Washington policy debate.

How did it come to this and how do we get out of it? I'll try offering some answers in coming days. For now, it's just unbelievable.

This post originally appeared at Jared Bernstein's On The Economy blog.

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