Robert Kuttner: Obama Should Stop Listening to the Deficit Hawks
[Robert Kuttner's new book is "A Presidency in Peril: The Inside Story of Obama's Promise, Wall Street's Power, and the Struggle to Control our Economic Future." He is co-editor of the American Prospect magazine and a senior fellow at Demos, a nonpartisan policy research and advocacy organization.]
Get ready for the dance of the deficit hawks.
The way they see it, the economy is headed for dangerous and uncharted fiscal territory because of rising deficits and debts, and therefore, we need extraordinary measures....
There are two basic roads to fiscal balance. We can cut spending, raise taxes, depress the rate of growth — and balance the budget at a lower level of economic output. Call it the austerity cure....
World War II is history's great example. Detractors of President Franklin D. Roosevelt contend that it wasn't the New Deal that cured the Depression but the war. And they are mostly right. For all of his public works spending, FDR's deficits in the 1930s were pretty modest, typically 4% or 5% of GDP. Then came the war, with deficits as large as 29% in a single year.
The war mobilization put 10 million people back to work, with another 12 million in the armed forces. It recapitalized American industry, invested massively in technology, and GDP increased nearly 50% in four years. When the war ended, pent-up consumer demand set off the postwar boom.
In 1945, the public debt was about 120% of GDP, more than double today's level. But for 30 years the economy grew faster than the debt, and by the mid-1970s, the debt had declined to about 26% of GDP. We need that kind of massive recovery commitment today — minus the war.
In the short run, we need to spend several hundred billion dollars more, on state and local fiscal relief and job creation. But President Obama's embrace of the deficit hawks has painted him into a corner where major new spending seems irresponsible....
Read entire article at LA Times
Get ready for the dance of the deficit hawks.
The way they see it, the economy is headed for dangerous and uncharted fiscal territory because of rising deficits and debts, and therefore, we need extraordinary measures....
There are two basic roads to fiscal balance. We can cut spending, raise taxes, depress the rate of growth — and balance the budget at a lower level of economic output. Call it the austerity cure....
World War II is history's great example. Detractors of President Franklin D. Roosevelt contend that it wasn't the New Deal that cured the Depression but the war. And they are mostly right. For all of his public works spending, FDR's deficits in the 1930s were pretty modest, typically 4% or 5% of GDP. Then came the war, with deficits as large as 29% in a single year.
The war mobilization put 10 million people back to work, with another 12 million in the armed forces. It recapitalized American industry, invested massively in technology, and GDP increased nearly 50% in four years. When the war ended, pent-up consumer demand set off the postwar boom.
In 1945, the public debt was about 120% of GDP, more than double today's level. But for 30 years the economy grew faster than the debt, and by the mid-1970s, the debt had declined to about 26% of GDP. We need that kind of massive recovery commitment today — minus the war.
In the short run, we need to spend several hundred billion dollars more, on state and local fiscal relief and job creation. But President Obama's embrace of the deficit hawks has painted him into a corner where major new spending seems irresponsible....