Stuck in Place
NEW YORK TIMES Editorial …When consumption and investment are not powering the economy, the government sector has to fill the gap with stimulus to boost consumer demand. Much of the economy’s flat performance since 2011 reflects insufficient stimulus, reinforcing insufficient demand. That means sluggish job growth, lackluster pay and persistently weak demand. It’s not a downward spiral, but it is self-reinforcing stagnation ..
Responding to the latest employment report, the White House noted correctly that major areas of job weakness — including positions in construction and teaching — are precisely those that would have been the subject of the jobs bill proposed in 2011 by President Obama. That legislation was blocked by Congressional Republicans….
That leaves the Federal Reserve to try to boost the economy. But what’s needed is direct intervention in the form of more federal spending on education, infrastructure, clean energy, basic research and job training. Until then, we’re stuck… (more)
EDITOR: At this point, failure for the economy to grow is fully the responsibility of the Republican Party. When in 2010 and 2011 virtually every economist in the country begged for fiscal stimulus, they turned their backs to gain an advantage in the 2012 election. Shame.
First we must get people back to work, off the dole and paying taxes, and then deal even further with the deficit problem.
I thought we did that? Was the 787 Billion stimulus chump change? Mr. Editor, How do we pay this back? If my mind is not deceiving me, I can’t recall that our government ever paid off it’s debt and rarely ever tried to do so.
EDITOR: Since you ask…. Once people are back to work, thus increasing tax revenue and reducing government expense for unemployment insurance and others safety net programs, the deficit will shrink to zero as it did during the Clinton administration at the end of the 1990s.
Four more points, since you inquire:
1) The initial stimulus stopped the plunge into a 1930s type Depression, if not worse. But by 2010 it was apparent to almost all economists that a second stimulus was needed. Republicans blocked all such efforts, in large part as an attempt to defeat Barack Obama in 2012.
2) When peple are back to work, the other side of Keynseian Economics can be applied by increasing taxes and reducing government expenditures, thus paying down the national debt.
3) But even more importantly, when the economy against expands at a brisk rate, the ratio of national debt to Gross National Product will be reduced to a moderate level of say 60% to 65%. Moreoever, say 2% inflation will also substantially reduce the national debt over time.
4) As Alexander Hamilton understood, there must be a national debt in order for the banking and currency system to operate properly. A concern of some economists, including the head of the Federal Reserve during the Clinton boom years, was what would happen if the national debt was paid off! (Of course “W” removed that danger with tax cuts for the rich, foolish expansion of our mission in Afghanistan and a baseless invasion and mission creep in Iraq.)
One can also find the above in an introductory course in Economics.