Public Spending and Economic Recovery
From Mark Weisbrot of CEPR:
Contrary to the complaints of the right, the problem is that the fiscal stimulus has been much too small, amounting to less than one percent of GDP, taking into account the cutbacks by state and local governments. This is just a fraction of the private spending lost from the collapse of the housing bubble.
Economists John Schmitt and Dean Baker of the Center for Economic and Policy Research have calculated that the lost wages from 2008-2012, as a result of the recession, will top $1 trillion – more than the estimated 10-year cost of health care reform. The non-partisan Congressional Budget Office estimates unemployment at more than 7 percent in 2012. This is a lot of unnecessary suffering for millions of people.
Congress passed its first stimulus package in February of 2008, when unemployment was 4.8 percent. Should we now accept millions more jobless as “normal,” just because Wall Street traders are getting rich again?
As for the U.S. public debt, it was 122 percent of GDP in 1946, which initiated an era of nearly three decades of solid growth that was – unlike in the post-Reagan era – broadly shared. Our 2009 gross federal debt of 81 percent of GDP should be the least of our concerns; we can worry about it when employment has recovered. Until then, it will be the government’s role to steer the economy out of this current mess.
Obviously having a gross federal north of 80% isn’t ideal, but you’re really seeing the lack of commitment to job creation demonstrated in stark terms. There’s just no attempt at parity between the size of the problem and the response.