Even Republican Economists Oppose Austerity

There is a battle going on in the Republican class war for millionaires, billionaires and corporate criminals.  While the focus for Democrats is on jobs, that for Republicans is for austerity.  After all, every penny spent on people who are in need, deserving, or both is a penny Republicans can’t spend on socialism for the rich.  The economic evidence is so obvious to all but the most highly-priced “play for pay” economists that even Republican economist’s oppose austerity.  Sadly, they are not getting the attention they deserve.

The boasts of Congressional Republicans about their cost-cutting victories are ringing hollow to some well-known economists, financial analysts and corporate leaders, including some Republicans, who are expressing increasing alarm over Washington’s new austerity.

Their critiques have grown sharper since last week, when President Obama signed his deficit reduction deal with Republicans and, a few days later, when Standard & Poor’s subsequently downgraded the credit rating of the United States.

But even before that, macroeconomists and private sector forecasters were warning that the direction in which the new House Republican majority had pushed the White House and Congress this year — for immediate spending cuts, no further stimulus measures and no tax increases, ever — was the wrong one for addressing the nation’s two main ills, a weak economy now and projections of unsustainably high federal debt in coming years.

Instead, these critics say, Washington should be focusing on stimulating the economy in the near term to induce people to spend money and create jobs, while simultaneously settling on a long-term plan for paying down federal debts.

There is broad disagreement among economists about the proper balance between spending cuts and tax increases in reducing a government’s debts. Some studies by both liberal and conservative economists suggest that emphasizing spending cuts is better for long-term growth. But there are few if any precedents for paying down such a large debt solely through spending cuts.

Among those calling for a mix of cuts and revenues are onetime standard-bearers of Republican economic philosophy like Martin Feldstein, an adviser to President Ronald Reagan, and Henry M. Paulson Jr., Treasury secretary to President George W. Bush, underscoring the deepening divide between party establishment figures and the Tea Party-inspired Republicans in Congress and running for the White House… [emphasis added]

Inserted from <NY Times>

What we need most at this time is for President Obama to use the bully pulpit to back congressional Democrats’ positions and the power of his office to lobby for them in Congress.  However, it seems apparent that he is more focused on his job than he is on our jobs.  Therefore, economists in his administration are bailing out due to inattention to their expertise.

Binyamin Applebaum and Helen Cooper summarize the state of thinking about economic policy inside the administration:

Obama’s senior adviser, David Plouffe, and his chief of staff, William M. Daley, want him to maintain a pragmatic strategy of appealing to independent voters by advocating ideas that can pass Congress, even if they may not have much economic impact. […] Gene Sperling, Mr. Obama’s chief economic adviser, say public anger over the debt ceiling debate has weakened Republicans and created an opening for bigger ideas […] Pfeiffer, the White House director of communications, said that there was no internal debate […] Obama and his aides are skeptical that voters will reward bold proposals if those ideas do not pass Congress. It is their judgment that moderate voters want tangible results rather than speeches. […] wide range of economists say the administration should call for a new round of stimulus spending […] A series of departures has left few economists among Mr. Obama’s senior advisers […] Mr. Plouffe and Mr. Daley share the view that a focus on deficit reduction is an economic and political imperative […] As part of this appeal to centrist voters, the president intends to continue his push for a so-called grand bargain on deficit reduction […] Administration officials say that their focus is on a number of smaller programs that could benefit the economy.

I see this debate as reflecting the pathologies of collective decision-making process. What you really have is one group of people, mostly economists, who think the economy needs a big new stimulus. Then you have a second group of people, mostly professional political operatives, who think that picking a public fight with congressional Republicans about a big new stimulus package would be a political loser… [emphasis added]

Inserted from <Think Progress>

Both groups are probably correct, to some degree, but I think Obama is backing the wrong horse.  The reason is this.  Unless the President makes a much stronger call for major jobs programs, he will be seen as part of the problem, not part of the solution, because only Wall Street is focused on the deficit.  Main Street is focused on jobs.  Moreover, to have an effective second term, Obama will need long coattails in 2012.  His present strategy of blaming congressional partisanship is a non-starter, because it obscures the truth that Democrats have bent over more than backwards to accommodate Republicans.  Every time they do, Republicans say no and make new demands, even more extreme than the last.  For Obama to honestly state this simple truth, over and over again, may cost him a few independent votes, but it would swell his support from the left and from the majority of independent voters, whose focus is on jobs, and it would help elect Democrats to Congress.