300 Economists Warn That Deficit Hysteria Is a Big Con That
Threatens to Drive America into a Full-Blown Depression
The experts called for a sane policy of growing our
way out of debt by kick-starting the real economy in
which most of us live and work.
By Joshua Holland
September 16, 2010
On Thursday, 300 economists and analysts issued a statement
warning that the "deficit hawks" who appear to be gaining
the upper hand in our economic debates are threatening to
turn an already deeply painful recession into a full-blown
In a conference call with reporters organized by the
Campaign for America's Future, the experts warned that the
American economy now stands at a crucial juncture. They
acknowledged that public debt is mounting, and presented a
choice of two different paths to right the ship: imposing
fiscal "austerity" today, in the midst of the most serious
downturn since the Great Depression, or investing in the
American economy -- with public spending over the short term
-- in order to grow our way out of the red ink.
Former Labor Secretary Robert Reich said that the
economists' statement "is both a warning about the danger of
deflation and continued stagnation, and it's also a plan for
growth -- the right way to approach and address long-term
deficits." Reich warned that if the policies being pursued
by Washington's deficit hawks continue, we risk not only a
"double-dip" recession, but possibly a "lost decade, similar
to that experienced by Japan during the 1990s.
The wonks advocate increased aid to cash-strapped states and
municipalities, direct support for public service jobs and
comprehensive investments in America's aging infrastructure.
"This is about a high road to recovery versus a low road to
fiscal balance," said Robert Kuttner, a senior fellow with
Demos. "All of us want reduced deficits at some point. The
question is: what is the proper sequencing, and what is the
proper analysis of cause and effect?" Kuttner said the
economists' view was "simple." "You get the recovery first,
and that requires increased public investment, and then the
road to fiscal balance is much less arduous because people
are working, businesses are investing and tax revenues go up
because you're in recovery."
"We live with falling bridges, collapsing sewers, decrepit
schools, aged gas lines and much more," said Robert
Borosage, co-Director of the Campaign for America's Future.
"Everyone agrees we have to rebuild an aging and outmoded
infrastructure, and there's no better opportunity to do so
than now -- interest rates are low, construction workers are
idled, and anyone with a whit of business sense would grab
this moment to launch a major project to rebuild America."
Borosage contrasted that view with a proposal put forward by
House Minority Leader John Boehner, R-Ohio, to cut $100
billion in discretionary spending next year, at a time when
consumers are too maxxed out to create the demand needed to
get the economy back on track. "There can be no clearer
statement of the divorce between ideology and basic good
business sense," said Borosage.
During Thursday's conference call, all of the speakers
agreed that the public discourse around these issues has
been skewed by conservative ideologues. "There's been a huge
investment in influencing public opinion on the part of
fiscal conservatives who are also long-standing
philosophical opponents of social insurance," said Kuttner.
Dean Baker, co-Director of the Center for Economic and
Policy Research, called it "striking" that "we've had a
narrative around this downturn that is that is 180 degrees
at odds with reality." The common storyline, he said, is
that "we have an out-of-control government and out-of-
control government spending." But, according to Baker, "it's
very easy to show that this has almost no plausible
relationship with the deficits we're facing." He explained
that the cause of the deficits are quite simple: Bush's
unfunded tax cuts, bloated defense budgets and an economic
downturn that has the American economy operating at a level
10 percent beneath its potential capacity. He added that
over the long haul, the real challenge facing American
families and businesses will continue to be health-care
costs, which are around 2.5 times higher in the U.S. than in
other wealthy nations.
The experts stressed the need to restore the agenda that
prevailed during the middle of the last century, when the
American middle class was created. During that time,
prosperity was broadly shared, and a large swath of the
population could afford to buy the goods and services they
created, spurring greater investment and dynamic growth.
Over the short-term, the economists argued, that requires
taking the "high road" to fiscal balance. You can read their
statement in its entirety at dontkilljobs.org.
[Joshua Holland is an editor and senior writer at AlterNet.
He is the author of The 15 Biggest Lies About the Economy
(and Everything else the Right Doesn't Want You to Know
About Taxes, Jobs and Corporate America). Drop him an email
or Follow him on Twitter.]
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