New York Times reporters Jackie Calmes and Jonathan Weisman pushed hard on Keynesian stimulus economics on Thursday, hiding behind a random round-up of quotes from liberal economists in "Emphasis on Deficit Reduction Is Seen by Economists as Impeding Recovery."
The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists.
After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery.
Hardly a day goes by when either government analysts or the macroeconomists and financial forecasters who advise investors and businesses do not report on the latest signs of economic growth -- in housing, consumer spending, business investment. And then they add that things would be better but for the fiscal policy out of Washington. Tax increases and especially spending cuts, these critics say, take money from an economy that still needs some stimulus now, and is getting it only through the expansionary monetary policy of the Federal Reserve.
“Fiscal tightening is hurting,” Ian Shepherdson, chief economist of Pantheon Macroeconomic Advisors, wrote to clients recently. The investment bank Jefferies wrote of “ongoing fiscal mismanagement” in its midyear report on Tuesday, and noted that while the recovery and expansion would be four years old next month, reduced government spending “has detracted from growth in five of past seven quarters.”
Calmes is a long-standing supporter of Obama in her White House reporting, and predictably paints him as a moderate voice of reason against the reckless GOP:
In all this time, the president has fought unsuccessfully to combine deficit reduction, including spending cuts and tax increases, with spending increases and targeted tax cuts for job-creation initiatives in areas like infrastructure, manufacturing, research and education. That is a formula closer to what the economists propose. But Republicans have insisted on spending cuts alone and smaller government as the key to economic growth.
Thursday will capture as plainly as any day lately the differing approaches of Mr. Obama and Republicans toward the economy and government’s role.
Mr. Obama plans to travel to Austin, Tex., to visit technology students, workers and entrepreneurs and promote his ideas to support efforts like theirs -- the kind of initiatives that Republicans have blocked.
(Calmes' vague and sloppy wording notwithstanding, the Republicans aren't actually blocking anything that the schools in Austin are trying to do. She's apparently referencing Obama's brand new proposed government-business partnerships -- "manufacturing innovation institutes." As if such job-training schemes have such a sterling record of success.)
Calmes continued to cherry pick sources to portray the GOP as extreme:
House Republicans expect to pass a measure that would allow the Treasury to “prioritize” debt payments if Congress and Mr. Obama cannot agree this year to increase the nation’s debt ceiling so the Treasury can keep borrowing money to pay all creditors. Under the bill, as tax receipts came in, the first priority would be paying creditors -- like China, Democratic opponents argue -- and second would be Social Security checks. But the measure would likely die in the Democratic-controlled Senate.
The “prioritization” proposal first arose in 2011 from among the most conservative House Republicans, those who were driving hardest against the White House on raising the debt ceiling and expressing unconcern about default, but it has now become mainstream in the House ranks.
Economists and financial analysts generally dismiss the idea as unworkable if not dangerous, and count on Democrats to block it. Gregory Daco, a senior principal economist at IHS Global Insight, said the Republicans’ proposal was the kind that caused his clients to ignore the fiscal policy out of Washington, and rely instead on the Fed to buttress the recovery.
He noted that the economy was much stronger than Europe’s largely because the United States initially opted for stimulus measures and allowed deficits to increase when the recession and financial crisis hit five years ago. European governments pursued austerity policies to cut their debts, further stalling economic activity and in turn inflating deficits.
National Review's Michael Tanner criticized Times columnist Paul Krugman's knee-jerk calls for still more federal stimulus spending, pointing out "there have actually been few spending cuts in Europe, so it makes little sense to blame them for poor performance."