A weekend New York Times column on the depressing—and depressed— fiscal condition our nation finds itself in begins as follows:
The boasts of Congressional Republicans about their cost-cutting victories are ringing hollow to some well-known economists, financial analysts and corporate leaders, including some Republicans, who are expressing increasing alarm over Washington’s new austerity and antitax orthodoxy.
As President Obama capitulated to Republicans on the terms of the deficit reduction deal and as Standard & Poor’s downgraded our nation’s credit rating, those critiques have grown sharper, according to the Times.
Some of those critics, along with their critiques:
— One-time standard-bearers of Republican economic philosophy like Martin Feldstein, an adviser to President Ronald Reagan, and Henry M. Paulson Jr., Treasury secretary to President George W. Bush, calling for a mix of (spending) cuts and revenue (increases).
— Ethan Harris, co-head of global economics research at Bank of America, calling for both revenue enhancement measures and entitlement reform.
— Bill Gross, who runs the giant bond-trading firm Pimco, writing in the Washington Post on Friday:
An anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking…Washington hassles over debt ceilings instead of job creation in the mistaken belief that a balanced budget will produce a balanced economy. It will not.
And, even before the deficit reduction deal:
[M]acroeconomists and private sector forecasters were warning that the direction in which the new House Republican majority had pushed the White House and Congress this year — for immediate spending cuts, no further stimulus measures and no tax increases, ever — was wrong for addressing the nation’s two main ills, a weak economy now and projections of unsustainably high federal debt in coming years.
On spending cuts:
— Jerry Webman, chief economist of OppenheimerFunds, wrote in an analysis that while the cuts were not huge this year or next, “they are nonetheless contrary to what would be expected in a fragile economic environment.”
— Joel Prakken, chairman of Macroeconomic Advisers, a forecasting firm, and Laurence H. Meyer, its co-founder and a former Federal Reserve governor, call the reductions “job-killing spending cuts” — playing on Republicans’ mantra against “job-killing tax increases.” Prakken claiming that tighter spending would “slow economic growth unless it was offset with lower interest rates through the Fed.”
— Mark Zandi, chief economist of Moody’s Analytics, says that Congress should “[A]t the very least” renew for another year payroll tax relief for employees and extended unemployment compensation — two measures that expire in 2011.
To be fair, the Times points to some support for Republican fiscal policy. John B. Taylor, a professor at Stanford and an adviser to Republican presidents and presidential candidates, said in an interview that temporary stimulus measures were counterproductive, and for long-term debt reduction, “I would try very hard to make it work without revenues.”
The Times points to something that was painfully evident during the Iowa Republican debate Thursday night: The “fervor” Republican candidates share with Cantor’s “We were not elected to raise taxes or take more money out of the pockets of hardworking families and business people.” When asked who would reject “a long-term debt reduction package that had $10 in spending cuts for every $1 in revenue increases,” all eight Republican presidential candidates raised their hands.
But what caught my attention the most were the comments made by Ian C. Shepherdson, chief United States economist for High Frequency Economics, a research firm. He said in an interview:
I think the U.S. has every chance of having a good year next year, but the politicians are doing their damnedest to prevent it from happening — the Republicans are — and the Democrats to my eternal bafflement have not stood their ground.
His words remind me that at one time, in the days of “It’s the economy, stupid,” politicians used the state of the economy to hammer the opposition.
Sadly, we have become a nation where “It’s the politics, stupid!” seems to reign—an environment where politicians hammer our economy for purely partisan purposes, and the hell with the consequences for the average American.
