I frequently revert to my unending criticism of President Obama for “punting” on the 2009 economic stimulus program. The most recent example was my June 13 posting, wherein I noted how Stephanie Kelton provided us with an interesting reminiscence of that fateful time during the first month of Obama’s Presidency, in a piece she published on William Black’s New Economic Perspectives website:
Some of us saw this coming. For example, Jamie Galbraith and Robert Reich warned, on a panel I organized in January 2009, that the stimulus package needed to be at least $1.3 trillion in order to create the conditions for a sustainable recovery. Anything shy of that, they worried, would fail to sufficiently improve the economy, making Keynesian economics the subject of ridicule and scorn.
As it turned out – that is exactly what happened. Obama’s lack of leadership and his apologetic, half-assed use of government power to fight the recession has brought us to where we are today. It may also bring Barack Obama and his family to a new address in January of 2013.
At this point, the “austerian” economists are claiming that the attenuated stimulus program’s failure to bring us more robust economic growth is “proof” that Keynesian economics “doesn’t work”. The fact that many of these economists speak the way they do as a result of conflicts of interest – arising from the fact that they are on the payrolls of private firms with vested interests in maintaining the status quo – is lost on the vast majority of Americans. Unfortunately, President Obama is not concerned with rebutting the arguments of these “hired guns”. A recent poll by Bloomberg News revealed that the American public has successfully been fooled into believing that austerity measures could somehow revive our economy:
As the public grasps for solutions, the Republican Party is breaking through in the message war on the budget and economy. A majority of Americans say job growth would best be revived with prescriptions favored by the party: cuts in government spending and taxes, the Bloomberg Poll shows. Even 40 percent of Democrats share that view.
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Though Americans rate unemployment and the economy as a greater concern than the deficit and government spending, the issues are now closely connected. Sixty-five percent of respondents say they believe the size of the federal deficit is “a major reason” the jobless rate hasn’t dropped significantly.
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Republican criticism of the federal budget growth has gained traction with the public. Fifty-five percent of poll respondents say cuts in spending and taxes would be more likely to bring down unemployment than would maintaining or increasing government spending, as Obama did in his 2009 stimulus package.
The voters are finally buying the corporatist propaganda that unemployment will recede if the government would just leave businesses alone. Forget about any government “hiring programs” – we actually need to fire more government employees! With those annoying regulators off their backs, corporations would be free to hire again and bring us all to Ayn Rand heaven. You are supposed to believe that anyone who disagrees with this or contends that government can play a role in job creation is a socialist.
Nevertheless, prominent individuals from the world of business and finance are making an effort to debunk these myths. Bond guru Bill Gross of PIMCO recently addressed the subject:
Solutions from policymakers on the right or left, however, seem focused almost exclusively on rectifying or reducing our budget deficit as a panacea. While Democrats favor tax increases and mild adjustments to entitlements, Republicans pound the table for trillions of dollars of spending cuts and an axing of Obamacare. Both, however, somewhat mystifyingly, believe that balancing the budget will magically produce 20 million jobs over the next 10 years. President Obama’s long-term budget makes just such a claim and Republican alternatives go many steps further. Former Governor Pawlenty of Minnesota might be the Republicans’ extreme example, but his claim of 5% real growth based on tax cuts and entitlement reductions comes out of left field or perhaps the field of dreams. The United States has not had a sustained period of 5% real growth for nearly 60 years.
Both parties, in fact, are moving to anti-Keynesian policy orientations, which deny additional stimulus and make rather awkward and unsubstantiated claims that if you balance the budget, “they will come.” It is envisioned that corporations or investors will somehow overnight be attracted to the revived competitiveness of the U.S. labor market: Politicians feel that fiscal conservatism equates to job growth.
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Additionally and immediately, however, government must take a leading role in job creation. Conservative or even liberal agendas that cede responsibility for job creation to the private sector over the next few years are simply dazed or perhaps crazed. The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper. That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities. Our labor force is too expensive and poorly educated for today’s marketplace.
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In the near term, then, we should not rely solely on job or corporate-directed payroll tax credits because corporations may not take enough of that bait, and they’re sitting pretty as it is. Government must step up to the plate, as it should have in early 2009.
Hedge fund manager, Barry Ritholtz discussed his own ideas for “Jump Starting the U.S. Economy” on his website, The Big Picture. He concluded the piece by lamenting the fact that the federal debt/deficit debate is sucking all the air out of the room at the very time when people should be discussing job creation:
The focus on Deficits today is absurd, forcing us towards another 1938-type recession. The time to reduce the government’s economic deficit and footprint is during a robust expansion, not during (or just after) major contractions.
During the de-leveraging following a credit crisis is the worst possible time to be deficit obsessed.
Don’t count on President Obama to say anything remotely similar to what you just read. You would be expecting too much.