Deficit Reduction Is Ruining America
It’s official: The spending cuts of 2011 and 2012, pushed by Republicans as necessary given our deficits, have damaged the recovery and kept more people out of work. According to Jackie Calmes and Jonathan Weisman of The New York Times, “The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011.”
That period, the Times notes, “coincides with the time that Mr. Obama and Congressional Republicans have shared governance since Republicans took control of the House in 2011, promising an immediate $100 billion in spending cuts.” And while we didn’t see that level of austerity at the time, the budget compromises of the last year will lower annual discretionary spending to its lowest levels in fifty years.
To put that it slightly different terms, if not for two years of deficit reduction, 1.5 million more Americans would be employed, and the economy would be growing fast enough to lower joblessness at a steady clip. And this is to say nothing of the ongoing austerity on the state level, which has had a nearly equal effect on economic growth.
By simply preserving public sector jobs and postponing deficit reduction, there’s a good chance we’d be at or near pre-recession levels of unemployment right now. And that’s to say nothing of the families and individuals who have been harmed by the sequester and its cuts to food stamps, unemployment insurance, and other programs.
This isn’t intuitive—most people associate lower debt with better finances—but it makes economic sense. Since the financial crash and Great Recession, the United States—and the global economy writ large—has faced a massive shortage of demand. There simply aren’t enough people buying goods and services. The 2009 stimulus bill was an attempt to plug that whole by giving money to individuals, families, businesses and states, through tax cuts and various programs.
It was successful! Within months, the economy stopped shedding jobs and began to make a rebound. But it wasn’t enough. And while the federal government has taken steps to preserve the recovery as best as possible, what the economy needs is another burst of spending to generate jobs and allow economic growth to achieve escape velocity.
We tend to talk about economic performance in passive terms—“growth is sluggish, unemployment continues to stay high”—but that obscures the reality of the situation. Washington made a choice; it decided to pursue debt reduction over securing the recovery. And this is the result—slower growth, greater joblessness, and more human misery.
But hey, the deficit is falling, so—you know—success?
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