Mike the Mad Biologist

Job Creation Vs. Deficit Reduction: Remember, People Have to Like This Stuff

Posted by Mike on February 19, 2010
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Add this to the “People have to like this crap” file. Over at AMERICAblog, John Aravosis asks Cornell economist Steven Kyle to comment on this figure distributed by Organizing for America:

road to recovery chart

Kyle:

It is a good illustration of exactly what many of us economists have been saying – the stimulus was big enough to stop the job loss, but not big enough to put all those unemployed people back to work again. So, if we switch to “deficit reduction mode,” as the President has said, and start cutting spending, there is a very real danger of slipping back into a recessionary dynamic (i.e., downward momentum could get reestablished – at the moment we are sort of just staggering along, neither here nor there).

What I find puzzling is that the Administration apparently seems to think that cutting spending is a bigger political winner than getting people jobs. No reading of the data I have ever seen would support that. And to the extent that some people DO like cutting deficits, it is irrelevant, because those types aren’t going to vote for a Democrat anyway.

The only thing Dick Cheney got right was “deficits don’t matter.” Our debt to GDP ratio was higher after World War II than it is today, and that led to a quarter-century of prosperity for the middle class. Everybody is for lower deficits in the abstract, but most voters decide using heuristics: do I have a job, is my economy doing well, and so on. Those who get upset about deficits aren’t going to vote for Democrats anyway–and Republicans certainly haven’t paid the price for running massive deficits, so it doesn’t seem that anyone really cares about them.

People, and the businesses that serve them, need jobs. Bring unemployment down to four percent, then worry about deficits.

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Comments

  1. #1 BaldApe
    February 19, 2010

    And states are hemorrhaging jobs. Restore revenue to the states, especially since the Medicaid burden is rising so fast. States can’t run deficits, but the federal government can and should (for the time being).

    Whatever steps the Federal government takes will be nullified if states are forced to cut jobs, as they have done.

  2. #2 Rob Monkey
    February 19, 2010

    I will never understand the free market obsession in this country. Is there something inherently wrong with people making a living wage off the govt? You know, teachers, cops, firemen (and women), etc. etc. It’s like Democrats should just get a shitload of those well-liked public employees and use them as a media human shield to pass a kickass stimulus. Put Repubs on one side, Dems on the other, real working Americans (TM by pickup truck companies) in the center. Dems: “They want to take yer jobs!” (a la South Park). Repubs: “but the free market jobs will be better!” Dems (less intelligibly, but LOUDER): “They want to take yer jobs! And give the money to bankers!” **cut to Repubs being torn to pieces like in any good zombie movie. **cut to new session in Congress. Blue Dogs are renamed Republicans and routinely get rotten fruit thrown on them. Liberals led by Alan Grayson and Obama (who found his balls behind the drapes where GWB was looking for the WMDs) usher in new era of prosperity. The Tea Party Nation disbands after massive die-offs, caused by Sarah Palin’s last-ditch effort to encourage her supporters to hold their breath until they turn blue, or until we get more tax cuts. Tea Partiers, not possessing the basic neurologic reflex to restart their breathing, collapse en masse on the National Mall. In unrelated news, the American IQ shoots up 36 points, while average BMI drops like a stone.

  3. #3 Min
    February 19, 2010

    “The only thing Dick Cheney got right was “deficits don’t matter.” Our debt to GDP ratio was higher after World War II than it is today, and that led to a quarter-century of prosperity for the middle class.”

    Debt doesn’t matter. Deficits do. Leave the debt to bury the debt. The deficit is too small.

    “People, and the businesses that serve them, need jobs. Bring unemployment down to four percent, then worry about deficits.”

    We need a bigger deficit now! Getting unemployment down, significantly and quickly, is of the highest priority. If we can afford to give the big bankers 800 million dollars in a few days, we can afford to end high unemployment.

  4. #4 FrauTech
    February 19, 2010

    Okay but…when people hear about stimulus spending or a deficit their first thought is “taxes”. And crazy neo-cons seem to think if we cut taxes (you didn’t really want police, firemen, or public schools did you?) that we’ll all suddenly have more money. Like, money to pay for security and road paving has to come from somewhere so people just don’t get that if the feds don’t provide that service somebody else will. That’s really all it is. People think if you cut taxes, they’ll get bigger paychecks. I bet if they cut income taxes by 10% for everyone paying taxes starting tomorrow businesses would start cutting everyone’s pay accordingly. But don’t tell the neo-cons that.