Thursday, January 31, 2013

Government austerity hurting economy

By Frank Moraes

There is a blogging problem that I've only really noticed the last few months. There is a constant feeling that you've written about "this" (whatever it is) before. Because you have. Because the same old bullshit comes up time and time again. Case in point: the size of the economy shrunk last quarter. Now, this hasn't happened since I started writing about politics. But I seem to write every day about the story behind this fact.

Our GDP decreased by 0.1% this last quarter. But if it weren't for the shrinking of government purchases, our GDP would have increased by 1.2%. That's right: the government is hurting our economy by not spending enough. And this has always been true for the last couple of years. It isn't just conservatives who are blithely unaware that the federal budget deficit has come down each of the last three years.[1]That in itself would not be so bad, given that it hasn't come down that fast. The problem is that at the same time, state and local budgets have plummeted.

Ezra Klein presents the following graph which shows the share of public and private spending as it relates to GDP. And what it shows is that despite the claims of conservatives—Government spending is out of control!—government is spending less and less, quarter after quarter.

So there we have it again: the government needs to spend more, not less. Government austerity is hurting our economy. It isn't a lack of "confidence" or a balanced budget. There is not enough demand and it ripples all through the economy. The government needs to spend more, not less.

[1] In looking for a reference, I was again reminded of just how deceptive conservatives are when they present the budget deficit. They invariably present the fiscal year 2009 budget as Obama's, even though it was Bush's budget. The more intellectually honest writers note this but then pass it off as though Obama could just step into office and change Bush's budget. Of course, I'm not blaming Bush for the budget deficit. It came about because of the financial crisis and the bursting of the housing bubble. It isn't particularly Bush's "fault," but it most definitely isn't Obama's.

(Cross-posted at Frankly Curious.)


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