Honest economists and sentient observers looking at the most recent and increasingly dismal economic and jobs numbers have their hair on fire over the failure of Washington D.C. to do anything about it. But neither Congress nor the Administration can get their heads out of the deficit sand to see the devastation.
The current conventional wisdom claims the central cause of anemic growth and joblessness after a financial collapse is deficits. That’s clearly wrong, but somehow this is too complicated for most of the media to grasp.
So it’s left to progressive advocates and journalists like Jane Hamsher and HuffPo’s Ryan Grim appearing on Cenk’s show, to push back on the conventional wisdom. It’s left to them to explain why the debt reduction talks in Joe Biden’s dining room are fundamentally misguided and indeed harmful to the country.
With most of the Beltway media preoccupied with what’s on Biden’s deficit reduction table, Jane correctly refocused the conversation on the absence of economic and jobs programs and the folly of slashing government spending and laying off workers. Good for her.
That opening allowed Ryan Grim to press Cenk’s GOP consultant, John Feehery, to explain exactly how cutting federal spending could create jobs during a recession. Grim challenged the Tea-GOP’s illogical talking point that businesses, who are sitting on over $1.5 trillion, are not hiring mainly because they lack confidence in government’s ability to control deficits.
Since interest rates are at historically low levels, investing now would make perfect sense, but where’s the demand? The obvious answer is seen not only in the unemployment numbers — people worried about losing their jobs are not about to increase their spending — but in another $1 trillion loss so far this year in homeowner’s housing wealth, as the burst housing market continues to slide back towards the pre-bubble trend level. Analysts say we may see another $1 trillion loss the rest of this year.
Equally important, surveys show that businesses understand perfectly well that they shouldn’t expand faster than consumers’ ability to buy their stuff. But somehow, this simple logic is lost on the folks at Biden’s table and reporters just let the unsupported talking point slide.
Tonight’s PBS News Hour had an exchange between CAP’s Heather Boushey, a liberal economist (Keynesian), who explained the real world, and Stephen Moore, from the Wall Street Journal and Club for Growth who couldn’t. [More on Stephen Moore here and here.] The latter at least conceded that businesses had money to invest and did not disagree with the economist’s explanation that the housing bust destroyed buying power. But when she explained that meant we should not be cutting government spending now when private spending has collapsed, Mr. Club for Growth switched brain sides and fell back to the talking point about businesses lacking confidence because of deficits and government regulation. It’s a wonder his head didn’t explode.
Jane is exactly right that the Club for Growth talking point is the conventional wisdom. Here’s President Obama’s Press Secretary today echoing the same Club for Growth gibberish:
We look forward to those negotiations producing — continuing to make progress and producing a bipartisan agreement that recognizes that there is common ground that can be found here to reach a goal that we all share, which is we need to reduce our deficit, not as an esoteric goal but in order to prove that we can live within our means and, by that, show — create confidence in our economy and grow the economy and create jobs.
This debate, these negotiations, again, are not just about numbers, they’re not about reducing deficits or debts as a goal unto themselves. They’re about economic growth and job creation. And the President thinks they’re very important; he’s committed to them. That’s why he has shown in his budget proposals, shown in the Affordable Care Act, that he is committed to deficit reduction, and shown by appointing the Vice President to lead these talks that his commitment remains very strong.
This is total gibberish, but it’s coming not from the most conservative economic groups in America but from the Obama team whose main argument for reelection is that they’re saner and will protect us from the crazies. Uh, those are the crazies’ arguments, Jay.
It’s painfully obvious that the America people, and particularly the middle class and working families, never mind the unemployed or struggling states and localities, have no one in the Biden talks to represent them.
Instead, those discussions include only faux deficit hysterics who won’t raise taxes on the rich and who come armed with gibberish economic views that, as we’re seeing in the UK, Ireland, Spain, Portugal and Greece, are only making matters worse with no end in sight.
The media needs to shine a light on these unrepresentative, closed door meetings and expose the Biden-led discussions for the undemocratic failure they are. The conventional wisdom about slashing core program spending is not just unpopular, its premise is economically wrong. Embracing that nonsense is hurting the country, and the public needs to see for itself how catastrophically wrong its elected officials have become.