Taughannock Falls

Taughannock Falls
from: althouse.blogspot.com

Thursday, August 5, 2010

Kuttner argues that exaggerated fear of deficits blocks economic recovery

Robert Kuttner has an interesting piece in which he criticizes the timidity of President Obama and Erskine Bowles on the issue of government spending.

This fall, Congress will either follow the conventional wisdom and prematurely cut government outlay before an economic recovery arrives, or it will increase public spending, put jobless Americans back to work, and reduce the deficit in a less painful fashion thanks to increasing economic tailwinds. The road that Congress takes depends on presidential leadership.

Kuttner goes on to quote approvingly from Yale economist Robert Shiller who asks the Obama administration to consider direct government job creation, W.P.A. style. While most of what Kuttner says makes a lot of sense, I don't feel Democrats need to do what Republicans under Reagan and the Bushes did for so long, and ignore the deficit. Kuttner is right that recovery will require some government spending. Yet there is a better alternative than deficit spending.

Bite the bullet, and end huge subsidies to the oil industry and other corporate interests that contribute so much to Congressional campaign coffers. Admit the fact that the wealthiest Americans caught a huge break with the Bush tax cuts, and that these cuts for them should expire as scheduled in 2011. Make it less financially attractive to ship jobs overseas. Begin enforcing our nation's labor laws, so that working and middle class people might have a little money to spend and thus stimulate the economy.

President Clinton was also criticized for being too concerned with the deficit. Yet the economy was quite healthy after his tax increases were adopted, and the deficit reduced. We may not be able to match Clinton's feat of actually producing a surplus, yet we shouldn't abandon the goal of striving towards a balanced budget.

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