I'm not trying to do a "prebuttal" here -- that's an ugly Washington move where you present a counter-argument to a speech or idea that hasn't been delivered yet. But we're already hearing the Republicans attack the president's forthcoming jobs plan as reckless spending that will just increase the deficit, blow up the debt, yada, yada...
So I wanted to make an essential yet poorly understood point about spending on jobs programs of the type we expect to hear Thursday night:
Temporary spending does NOT increase either the long-term deficit or the growth of the national debt.
The measures the president will introduce are temporary programs needed to ensure there's enough economic activity to support the growth and jobs we badly need. In normal times, private sector firms carry out much more of this function, but there's still way too much slack out there, and federal fiscal policy is the main game in town.
I grant you, "temporary" in this context is proving to be a number of years, but that's to be expected given the depth of the recession, the long deleveraging cycle (people paying or writing off debts), and the fact that we've already made some wrongheaded austerity moves extending the slog in which we're stuck.
But the above rule still holds (and is complemented by the fact that borrowing costs are so low right now). By way of example, consider the Recovery Act, which, at $800 billion, added much more to the deficit than the sum of what I expect to hear from the president.
The first figure shows the Recovery Act's contribution to annual deficits; the second shows the debt (the sum of accumulated deficits) as a share of GDP. Stabilizing the debt/GDP ratio is the first goal of sustainable budgeting (the second is to get that ratio falling).
As you can see, even a large spending measure, as long as it's temporary, expands the deficit only for a few years, and then becomes a very small factor. While it raises the level of the debt, once it's over, it does not contribute to its growth.
Compare those results with the Bush tax cuts, which look much more like permanent programs that continuously boost both annual deficits and the growth of the debt.
There are simply no good fiscal reasons not to implement measures that will boost paychecks, help the unemployed, and get folks back to work fixing up our infrastructure. By dint of being temporary, they have little impact on the growth of the debt, and by increasing economic activity, jobs, spending and investment, they lead to faster growth than would otherwise occur.
This post originally appeared at Jared Bernstein's On The Economy blog.
I don't have a problem with the feds providing the funds; I just wish the state would switch the preferred road material to cement from peanut butter or whatever they use now. It's like they never stay paved.
Please tell me exactly which roads YOU have built so that I do not inadvertently trespass.
I suspect by "ours" you mean Other People Whose Labor You Intend To Cite As Your Own.
Seriously... you must be joking. There is no big proposal that would attract republican support, period.
The ruling wealth in this country are unable to comprehend this and never will.
They have Reagon's Disease.
GOP -McConnell: Oct. 29, 2010: "The single most important thing we want to achieve is for President Obama to be a one-term president."
GOP : Rush “I hope he [Obama] fails”
Mike
I am sorry but this situation has gone on too long. I predict another sweep across the board in Congress and the WH if things do not change. The American People need Bigger and Better right now....I truthfully do not think $300 Billion is enough or will cause a dent in what needs to be done.
And when we really do get our "Act Together" we need to take Healthcare OUT of the Corporations and make a single payor system that works, maybe on a sliding scale, based on salary. Other countries have healthcare, and that is why they are working and we are not.
I truly believe that every worker that gets fired after 50 is because the Corporation no longer wants to carry their healthcare cost.
The other thing we need to do is TRAIN people again for the job. No one has a spare $4,000 to $20,000 to go back to these Training Colleges right now. It should be like it was when I first started working; with on the job training and a lower salary until you learn the job.
All Wall Street is looking for is a Clone of Ronald Reagan, and they are going to SIT on their money unitl they get a President they desire in the White House.
The most startling figure is if we cut foreign aide where we are "disliked" by 50%, cut war spending by 50%, and enacted the 9,9,9 program of Mr. Cain, we could fully fund all the social programs, and pay down the debt each year!!!
again. Isn't it strange no politician mentions the two elephants in the room. The 50 billion monthly
trade deficit, or the 4 million legal and illegal jobless people we allow in every year. Aren't we
suppose to be a Republic. What kind of government deliberately ships millions of jobs out of the
country,and then proceeds to import cheap foreign labor, pitting them against american workers
and their families?
The influx of cheap foreign labor if you haven't noticed has slowed and not due to tighter controls on the border but because wages here are not keeping up with wages elswhere.
Sure, better infrastructure helps the flow of commerce but a functioning bridge and a functioning factory are two entirely different things. A bridge can’t take newly introduced capital resources and convert those resources into an amount of wealth exceeding the monetary value of the original capital investment of those resources.