As Predicted, Austerity Policies Send US Economy Downward

[one...two...tree 2,762]

Progressives economists who spent much of the last four years warning against the implementation of austerity policies in the US did not share in the surprise expressed by many lawmakers and mainstream pundits when new GDP data released Wednesday showed Q4 growth trending the economy back towards official recession.

As warned by experts not cowed by the "deficit hawk" alarmists who dominate the national conversation on the economy, the dip in growth was not the result of "uncertainty" in the private sector or the future demands of public spending obligations, but rather on the contraction of public spending and the tax increases prematurely foisted on low-income and middle class workers in the form of a payroll tax increase that took effect on January 1.

As Washington Post policy analyst Ezra Klein writes: "The government is hurting the recovery, and badly. But it's not because it's spending too much, or because of concerns over future policy. It's because government, at all levels, is spending and investing too little."

And as Robert Borosage, from the Campaign for America's Future, told the Huffington Post: "Inflicting austerity on a weak economy is ruinous and is likely to drive us back into a recession."

"Those dismissing the downturn as due to an odd drop in government spending should consider that more of these are on the docket," Borosage continued, making reference to further government spending cuts, known as 'sequestration,' that will likely be implemented in March.

And, "It's certainly the case that the disappearance of the payroll tax holiday is a drag on the economy," said Chad Stone of the Center on Budget and Policy Priorities.

Meanwhile, Josh Bivens and Nicholas Finio—analysts at the progressive Economic Policy Institute—said the new GDP numbers were disappointing, but argued the economy wasn't likely to teeter back into full recession. The essential lesson, they said of the report, was an easy and long-established one: when government spending contracts, so does a struggling economy.

"When government spending drops, the economy suffers," they said. "The rest of the economy is simply not growing strong enough to make up for losses in demand due to government spending cuts."

"Wednesday's GDP report, while overstating the current weakness in the economy, clearly illustrates what economists have known since the 1930s: Government fiscal contraction during periods of excess capacity—particularly when interest rates are already near-zero—is exactly the wrong thing to do."

And the Huffington Post adds:

Congress is still driving headlong into the forced austerity known as sequestration, scheduled to take effect in March, which requires across-the-board spending cuts at the Pentagon and among domestic policy programs.

"Today's GDP numbers show the toll that political conflict over fiscal policy is taking on U.S. economic growth," said Adam Hersh, an economist at the Center for American Progress, a think tank closely allied with the Obama administration. "The 0.1 percent economic contraction puts the United States on the precipice of recession. Our economy would certainly have grown at a faster rate last quarter, were it not for political brinkmanship over the debt ceiling and the risk of sharp fiscal contraction in the form of automatic 'sequestration' budget cuts. That contraction is now unfolding."

Warnings about the dangers of austerity have been growing louder in recent months, even from sources that conventionally applaud austerity regimes. In October, the International Monetary Fund

issued a report

concluding that global policymakers had dramatically underestimated the significance of government spending during a recession. As a result, lawmakers expecting modest drags from austerity instead saw their economies plunge back into a devastating recession. The United Kingdom, where unemployment now stands at 7.7 percent, has experienced a triple-dip recession. In Spain and Greece, unemployment is over 25 percent, with savage humanitarian consequences: HIV infections in Greece are up by

over 1,500 percent

since the austerity campaign began in 2010.

And Klein concludes his analysis on the situation in the US this way:

So yes, the government is hurting the recovery. But it's not because of deficits or uncertainty, or at least, it's hard to find evidence for either theory. The real, provable damage the government has done to economic growth in recent years has been in cutting back on spending and investment since 2010.

http://www.commondre...line/2013/01/31

[I AM NOT THAT GUY 5,715]

Cool. The progressives are whining. There is hope for the future.

[james&olya 1,121]

And as the economy takes a nosedive all the 'expert' talking heads, especially all those who have already scared everybody into current 'belt-tightening', will demand even more of the same!

[himher 634]

"HIV infections are up 1500% because the government doesn't borrow and spend more"

I love liberal logic

Progressives economists who spent much of the last four years warning against the implementation of austerity policies in the US did not share in the surprise expressed by many lawmakers and mainstream pundits when new GDP data released Wednesday showed Q4 growth trending the economy back towards official recession.

As warned by experts not cowed by the "deficit hawk" alarmists who dominate the national conversation on the economy, the dip in growth was not the result of "uncertainty" in the private sector or the future demands of public spending obligations, but rather on the contraction of public spending and the tax increases prematurely foisted on low-income and middle class workers in the form of a payroll tax increase that took effect on January 1.

As Washington Post policy analyst Ezra Klein writes: "The government is hurting the recovery, and badly. But it's not because it's spending too much, or because of concerns over future policy. It's because government, at all levels, is spending and investing too little."

And as Robert Borosage, from the Campaign for America's Future, told the Huffington Post: "Inflicting austerity on a weak economy is ruinous and is likely to drive us back into a recession."

"Those dismissing the downturn as due to an odd drop in government spending should consider that more of these are on the docket," Borosage continued, making reference to further government spending cuts, known as 'sequestration,' that will likely be implemented in March.

And, "It's certainly the case that the disappearance of the payroll tax holiday is a drag on the economy," said Chad Stone of the Center on Budget and Policy Priorities.

Meanwhile, Josh Bivens and Nicholas Finio—analysts at the progressive Economic Policy Institute—said the new GDP numbers were disappointing, but argued the economy wasn't likely to teeter back into full recession. The essential lesson, they said of the report, was an easy and long-established one: when government spending contracts, so does a struggling economy.

"When government spending drops, the economy suffers," they said. "The rest of the economy is simply not growing strong enough to make up for losses in demand due to government spending cuts."

"Wednesday's GDP report, while overstating the current weakness in the economy, clearly illustrates what economists have known since the 1930s: Government fiscal contraction during periods of excess capacity—particularly when interest rates are already near-zero—is exactly the wrong thing to do."

And the Huffington Post adds:

Congress is still driving headlong into the forced austerity known as sequestration, scheduled to take effect in March, which requires across-the-board spending cuts at the Pentagon and among domestic policy programs.

"Today's GDP numbers show the toll that political conflict over fiscal policy is taking on U.S. economic growth," said Adam Hersh, an economist at the Center for American Progress, a think tank closely allied with the Obama administration. "The 0.1 percent economic contraction puts the United States on the precipice of recession. Our economy would certainly have grown at a faster rate last quarter, were it not for political brinkmanship over the debt ceiling and the risk of sharp fiscal contraction in the form of automatic 'sequestration' budget cuts. That contraction is now unfolding."

Warnings about the dangers of austerity have been growing louder in recent months, even from sources that conventionally applaud austerity regimes. In October, the International Monetary Fund

issued a report

concluding that global policymakers had dramatically underestimated the significance of government spending during a recession. As a result, lawmakers expecting modest drags from austerity instead saw their economies plunge back into a devastating recession. The United Kingdom, where unemployment now stands at 7.7 percent, has experienced a triple-dip recession. In Spain and Greece, unemployment is over 25 percent, with savage humanitarian consequences: HIV infections in Greece are up by

over 1,500 percent

since the austerity campaign began in 2010.

And Klein concludes his analysis on the situation in the US this way:

So yes, the government is hurting the recovery. But it's not because of deficits or uncertainty, or at least, it's hard to find evidence for either theory. The real, provable damage the government has done to economic growth in recent years has been in cutting back on spending and investment since 2010.

http://www.commondre...line/2013/01/31

[Karee 4,190]

"HIV infections are up 1500% because the government doesn't borrow and spend more"

I love liberal logic

The article doesn't say, but perhaps needle exchange programs lost funding.

So here's some logic for ya. It's much cheaper to fund a needle exchange program, than it is to pay for the years of healthcare these HIV infected people are going to require.

[Teddy B 17,252]

The article doesn't say, but perhaps needle exchange programs lost funding.

So here's some logic for ya. It's much cheaper to fund a needle exchange program, than it is to pay for the years of healthcare these HIV infected people are going to require.

That's exactly it. In the article the words "over 1500 percent" are a link that leads to another article explaining why.

[lostinblue 1,989]

The article doesn't say, but perhaps needle exchange programs lost funding.

So here's some logic for ya. It's much cheaper to fund a needle exchange program, than it is to pay for the years of healthcare these HIV infected people are going to require.

Why don't we just register every needle. Charge an addict say $20 per needle like the gun control people on this board want for guns.

[decocker 7,198]

Why don't we just register every needle. Charge an addict say $20 per needle like the gun control people on this board want for guns.

conservative logic.

The article doesn't say, but perhaps needle exchange programs lost funding.

So here's some logic for ya. It's much cheaper to fund a needle exchange program, than it is to pay for the years of healthcare these HIV infected people are going to require.

don't be silly. drugs are bad. drugs addicts are bad. the only solution is prohibition and imprisonment. would be easier if we could just kill them all, but you know, social progress has gotten the best of us it seems..

[Teddy B 17,252]

Why don't we just register every needle. Charge an addict say $20 per needle like the gun control people on this board want for guns.

The whole idea of the needle exchange program is to give addicts new and clean needles to prevent the spread of HIV, registering each needle and charging $20 each would be a bit counter productive to the sole purpose of the program, which has been proven to work. Don't you think?

Edited February 1, 2013 by Teddy B

[lostinblue 1,989]

The whole idea of the needle exchange program is to give addicts new and clean needles to prevent the spread of HIV, registering each needle and charging $20 each would be a bit counter productive to the sole purpose of the program, which has been proven to work. Don't you think?

you claim if we outlaw all the guns no one will die from guns then outlaw all needles and no one will die from an overdose .

[Teddy B 17,252]

you claim if we outlaw all the guns no one will die from guns then outlaw all needles and no one will die from an overdose .

I have never made such a claim, nor is it realistic to think either of those two scenarios to be plausible.

[Karee 4,190]

Why don't we just register every needle. Charge an addict say $20 per needle like the gun control people on this board want for guns.

Way to go off topic. You're not helping your position against gun control with posts like that.

[Karee 4,190]

you claim if we outlaw all the guns no one will die from guns then outlaw all needles and no one will die from an overdose .

I don't think the worry is that people will die from an overdose. I think the point is that people who contract HIV from IV drug use will pass it on to people that don't use IV drugs. So if the inital person does not contract HIV from drug use, there is no HIV to pass on. That's just logic in my mind. If you want to call that liberal logic so be it.

[I AM NOT THAT GUY 5,715]

And as the economy takes a nosedive all the 'expert' talking heads, especially all those who have already scared everybody into current 'belt-tightening', will demand even more of the same!

The DJIA crossed 14,000 today. My IRA's like it.

[Mr. Big Dog 10,747]

My "economy" just improved a lot - by 5 digits to left of the dot.