The Debt Crisis Starts The Moment We Stop Spending
It should be recognized that there is a difference between what politicians advocate due to political expediency and what the experts advocate. Neither are necessarily in tune and what is politically popular or feasible is often not the right course of action.
The reason we must not ignore what is politically difficult but absolutely correct and optimal is because we choose to make the right course of action politically impossible by not giving voice to those optimal paths – the silence perpetuates the idea that these paths are politically impossible and makes it a certainty.
So, what is politically popular (deficit cutting) is not the optimal response to an economic recession. As a matter of fact, austerity is the exact opposite of the proper path toward economic recovery. It provides no benefits and merely depresses the economy further, making future growth start from a lower level and, as a result, forcing permanent loss of economic potential. This actually makes deficit cutting more difficult in the long run. Not spending a few billion today would translate into trillions of lost income potential tomorrow and for the rest of eternity.
A few quotes from Stan Collender and Teresa Tritch:
The right time to make significant progress on the federal deficit is when the private sector is driving the economy and that means it should have happened in 2005-2007. Those who stood by and watched as spending was increased and revenues reduced when the time to reduce the deficit was right shouldn’t be given any credibility to whine about not doing something now when it’s not. – Colllender
Teresa Tritch, a long-time friend from what now seems like a previous life who currently is at the New York Times, had a great fact-laden, long-form editorial in the Sunday paper about what it’s going to take for the recession to be over in peoples’ lives rather than just reflected in the headline statistics. – Collender
What distinguishes this jobs recovery from others is the sheer scale of the job loss that preceded it. The economy has regained 3.6 million jobs since employment hit bottom in February 2010, but it is still missing nearly 10 million jobs — 5.2 million lost in the recession and 4.7 million needed to employ new entrants to the labor market. The Economic Policy Institute estimates that at the average rate of job creation in the last three months, it would take until the end of 2017, fully 10 years from the start of the Great Recession in December 2007, to return to the pre-recession jobless rate of 5 percent. – Tritch
First, Teresa’s point about how long it took for “the job gap” from the 2001 recession to close is especially important in the context of the the current economic recovery. The number of jobs was artificially high and the unemployment rate unofficially low by the time the 2008 recession began because of housing that we now know was ridiculously overvalued. Combine the bubble with the ability of consumers to borrow against the overinflated prices and homeowners to get absurd prices when they sold and it’s easy to see how business was stimulated to expand and hire to take advantage of the higher demand for…well…everything but what economists call inferior goods. – Collender