Economists See Deficit Emphasis as Impeding Recovery
By JACKIE CALMES and JONATHAN WEISMAN, NYT
WASHINGTON — The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists.
After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery.
Hardly a day goes by when either government analysts or the macroeconomists and financial forecasters who advise investors and businesses do not report on the latest signs of economic growth — in housing, consumer spending, business investment. And then they add that things would be better but for the fiscal policy out of Washington. Tax increases and especially spending cuts, these critics say, take money from an economy that still needs some stimulus now, and is getting it only through the expansionary monetary policy of the Federal Reserve.
“Fiscal tightening is hurting,” Ian Shepherdson, chief economist of Pantheon Macroeconomic Advisors, wrote to clients recently. The investment bank Jefferies wrote of “ongoing fiscal mismanagement” in its midyear report on Tuesday, and noted that while the recovery and expansion would be four years old next month, reduced government spending “has detracted from growth in five of past seven quarters.”
(More here.)
WASHINGTON — The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists.
After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery.
Hardly a day goes by when either government analysts or the macroeconomists and financial forecasters who advise investors and businesses do not report on the latest signs of economic growth — in housing, consumer spending, business investment. And then they add that things would be better but for the fiscal policy out of Washington. Tax increases and especially spending cuts, these critics say, take money from an economy that still needs some stimulus now, and is getting it only through the expansionary monetary policy of the Federal Reserve.
“Fiscal tightening is hurting,” Ian Shepherdson, chief economist of Pantheon Macroeconomic Advisors, wrote to clients recently. The investment bank Jefferies wrote of “ongoing fiscal mismanagement” in its midyear report on Tuesday, and noted that while the recovery and expansion would be four years old next month, reduced government spending “has detracted from growth in five of past seven quarters.”
(More here.)
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2 Comments:
The economy needs to continue to take its medicine. A bit of short term minor pain for genuine long term gain.
Impending Recovery? I thought the economy was roaring.
I was assured the payroll tax cut a few years ago would usher in significant growth. I was assured that the 'investments' in 'green energy' initiatives would pay off in the new 'green economy'. I was assured that the so-called fiscal cliff tax increases at the start 2013 were the first steps at deficit reduction and usher in yet further 'investments' resulting in still more growth in the economy. I was assured that the stimulus would have dropped unemployment below 6% by 2012 when it was passed in 2009. I was assured by Congressional Democrats and Obama himself that ObamaCare would allow small businesses to save $2500 per employee allowing that business to give its employees raises.
Have any of these assurances come to fruition? Nope. Impending recovery? I don't think so...
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