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Response to hfojvt (Original post)

Tue Jan 28, 2014, 12:25 PM

1. Looks like the

..."liar" (http://www.democraticunderground.com/10024391415#post4) already covered that.

Reversing Local Austerity


One question that arises when we talk about the possibility of reversing the disastrous push for austerity runs something like this: “OK, you say you want more government spending, but what should it spend money on?” The truth is that I think the perceived lack of shovel-ready projects was overstated even in 2009, but it was a real concern.

The point I want to make is that matters now are actually a lot easier: we could get a fairly big fiscal bang just by resuming aid to state and local governments, allowing them to reverse the big cuts they have recently made.

So here’s my chart. It shows employment by state and local governments, which has fallen around half a million, with the majority of the cuts coming from education. Moreover, the baseline should not be zero; it should be normal growth, say along with population growth. So I’ve indicated what would have happened to state and local employment if it had grown at its usual rate of 1% a year:

This suggests to me that we could put well over a million people to work directly, and probably around 3 million once you take other effects into account, without any need to come up with new projects; just transfer enough money to state and local governments to let them return to doing the essential business of government, like educating our children.

- more -


States of Depression


The economic news is looking better lately. But after previous false starts — remember “green shoots”? — it would be foolish to assume that all is well. And in any case, it’s still a very slow economic recovery by historical standards.

There are several reasons for this slowness, with the most important being the overhang of household debt that is a legacy of the housing bubble. But one significant factor in our continuing economic weakness is the fact that government in America is doing exactly what both theory and history say it shouldn’t: slashing spending in the face of a depressed economy...if it weren’t for this destructive fiscal austerity, our unemployment rate would almost certainly be lower now than it was at a comparable stage of the “Morning in America” recovery during the Reagan era.

Notice that I said “government in America,” not “the federal government.” The federal government has been pursuing what amount to contractionary policies as the last vestiges of the Obama stimulus fade out, but the big cuts have come at the state and local level...We’re talking big numbers here. If government employment under Mr. Obama had grown at Reagan-era rates, 1.3 million more Americans would be working as schoolteachers, firefighters, police officers, etc., than are currently employed in such jobs.

And once you take the effects of public spending on private employment into account, a rough estimate is that the unemployment rate would be 1.5 percentage points lower than it is, or below 7 percent — significantly better than the Reagan economy at this stage.

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This is why Republicans in Congress and State Governorships have been working hard to sabotage the recovery.

The Jobs Program That Wasn’t

Macroeconomic Advisers on the American Jobs Act, proposed a year ago:

We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.

-The various tax cuts aimed at raising workers’ after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would:
-Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013.
-Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline

Of course, it that had happened, Obama would be more or less a lock for reelection. Instead, having blocked the president’s economic plans, Republicans can point to weak job growth and claim that the president’s policies have failed.


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