Thursday, February 07, 2013

Well, Duh!

 Jon Queally, staff writer

As Predicted, Austerity Policies Send US Economy Downward

As if the lessons of recent European policies weren't enough or a century of proven economics, the US trudges towards stagnation and financial pain... by choice

Progressives economists who spent much of the last four years warning against the implementation of austerity policies in the US did not share in the surprise expressed by many lawmakers and mainstream pundits when new GDP data released Wednesday showed Q4 growth trending the economy back towards official recession.

As warned by experts not cowed by the "deficit hawk" alarmists who dominate the national conversation on the economy, the dip in growth was not the result of "uncertainty" in the private sector or the future demands of public spending obligations, but rather on the contraction of public spending and the tax increases prematurely foisted on low-income and middle class workers in the form of a payroll tax increase that took effect on January 1.

As Washington Post policy analyst Ezra Klein writes: "The government is hurting the recovery, and badly. But it’s not because it’s spending too much, or because of concerns over future policy. It’s because government, at all levels, is spending and investing too little."

And as Robert Borosage, from the Campaign for America's Future, told the Huffington Post: "Inflicting austerity on a weak economy is ruinous and is likely to drive us back into a recession."

"Those dismissing the downturn as due to an odd drop in government spending should consider that more of these are on the docket," Borosage continued, making reference to further government spending cuts, known as 'sequestration,' that will likely be implemented in March.

And, "It's certainly the case that the disappearance of the payroll tax holiday is a drag on the economy," said Chad Stone of the Center on Budget and Policy Priorities.

Meanwhile, Josh Bivens and Nicholas Finio—analysts at the progressive Economic Policy Institute—said the new GDP numbers were disappointing, but argued the economy wasn't likely to teeter back into full recession. The essential lesson, they said of the report, was an easy and long-established one: when government spending contracts, so does a struggling economy..... More.


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