With the sequester looming, the impending budget cuts have got the left screaming about the dangers of austerity. In a blog published on Feb. 27, co-founder, CEO, and Editor-in-Chief Henry Blodget predicted that our economy was “crappy” because of cutting back government spending. He also posed that this was the problem with European countries like Greece and England.
The problem, according to Blodget is that “we reduce economic growth” which then will “put more people out of work” when there are government spending cuts. Oddly absent from this article was any mention of how increased taxes affect businesses and consumer spending.
Blodget’s post took Paul Krugman-esque stances. In his Conscience of a Liberal blog post on Feb. 22, Krugman also attributed austerity to the perils in Greece. “All that austerity has taken a terrible toll,” he wrote. In addition, he charged that “countries pursuing austerity have by and large seen their debt positions worsen.”
For the left, there is never a good time to cut government spending.
Aparna Mather, economist and resident scholar of tax policy at the American Enterprise Institute, wrote in an op-ed for Real Clear Markets that one of the major problems with the economy was “uncertainty attached to investment decisions,” not austerity.
Businesses and investors aren’t taking risks because “firms are uncertain about the future fiscal and regulatory environment” and are saving funds “to combat future shocks” … like tax increases.
None of that mattered to Blodget, though, because the government needs to spend more money. That’s the solution to the Great Recession. The problem is that with increased government spending, like he suggested, there is a need for even more tax revenue.
In an op-ed for The Guardian on Feb. 25, American Enterprise Institute’s Resident Scholar John Makin stated that even before the sequester, the “tax increases already enacted on Jan. 1” along with the proposed “higher fuel prices” meant there is already an “economic drag” on the current economy.