While I can understand negotiating with Republicans in the short term to prevent a government shutdown, I fail to understand why the Obama Administration is not investing resources in educating Americans on basic economics. Those who are fighting for steep budget deficits need only understand that removing that spending from the economy has a negative multiplicative effect.
States forced to cut budgets by laying off workers and reduced spending at the same time the Federal Government is cutting spending is tantamount to the removal of billions in buying power from the economy. This will affect the local sandwich shop, car dealership, grocery store, etc. which will cause further private sector layoffs. These layoffs will produce even more layoffs until we are again forced into further deficit spending to assist the massive unemployment. This will put us in worst shape than a slow methodical decrease in spending over several years.
Many of those pushing this restrictive policy know exactly what they are doing. They know that the consequence of reducing government spending now will be an economic downturn. They know it will cause massive unemployment. Their goal is to keep America in a permanent state of low employment for the middle class in order to depress wages for their wealthy benefactors, the corporations, oligarchs, and plutocrats.
That the mainstream media is tepid in acknowledging this reality is unforgivable. That the mainstream media is tepid in acknowledging that the cuts affects solely the poor and middle class is unforgivable. That the left wing is beating up the President for his failure to effect better fiscal policy for the middle class as opposed to laying the path for the president to follow by educating Americans in a myriad of venues about how the economy really work is despicable. That all liberals have failed to metastasize in the middle classes’ minds that class warfare is being waged upon them is a major opportunity lost.
History has a tendency of repeating itself. During the Depression as the economy was recovering, the same types of premature cuts were instituted which brought the recovery to a stall and a precipitous dip. Not till the mother of all stimuli (World War II) did the economy recover for a substantial amount of time.
If Americans were given this information they would force their politicians to pass appropriate policies as opposed to repeating the mistakes of the past. What Republicans are forcing is the well known tenet. Insanity is doing the same thing over and over while expecting a different result.
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Budget Cuts Raise Doubt on Course of Recovery
By BINYAMIN APPELBAUM Published: April 11, 2011
WASHINGTON — The budget deal struck last week amounts to a bet by the Obama administration that the loss of $38 billion in federal spending will not be the straw that breaks the back of a fragile economic recovery.
Economic conditions can determine the outcome of elections, and growth remains tepid and tentative just 18 months before voters decide if the president gets a second term.
The proposed federal spending cuts, which were decided late Friday, do not amount to much by themselves, about 0.25 percent of annual domestic activity. But they join a growing list of minor problems impeding growth, economists said, including higher fuel prices and bad weather, Europe’s creeping malaise and the effect of the Japanese earthquake.
The impact of those problems, combined with growing cuts in spending by federal, state and local governments, has led some experts who had forecast that the economy would expand by more than 4 percent in 2011 to retreat toward a 3 percent growth rate. And it raises the question of how many more small cuts the president can afford.
Diane Swonk, chief economist at Mesirow Financial, a Chicago investment firm, said she had cut her forecast for 2011 to 3.3 percent, from 4.2 percent. And if growth falls below 3 percent, she said, “You’re just running on a treadmill. You’re not getting anywhere.”
There are reasons for optimism. The Federal Reserve and private forecasters say that the economy’s vital signs are getting steadily stronger. Factories are expanding production; people are buying more cars. Leading forecasters like the firm Macroeconomic Advisors of St. Louis to predict that growth will accelerate after the first quarter.
Moreover, supporters of the cuts say that reduced government spending will stimulate economic growth, not damp it — and that the president could be among the political beneficiaries.
As the government spends less it borrows less, and companies can borrow more. As the government collects less money in taxes, companies may increase spending and investment.
“This cut combined with other cuts in entitlement reform will give the economy and businesses and investors some positive news on the fiscal front in Washington,” said Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian think tank that favors even larger reductions in the federal spending.
There is also the potential that the budget deal will serve as a precedent for a broader deal on long-term spending. Economists say that such a deal would have immediate economic benefits, soothing the nerves of foreign investors who may be fretting about the government’s ability to confront its problems.
