The Destructive Conservative Myth That Keeps Our Economy in Tatters
Continued from previous page
The private sector didn’t come to the rescue. In 2009 according to Steven Benen of the Washington Monthly it lost more than 4.5 million jobs. In the succeeding year and a half, according to the Bureau of Labor Statistics, it made back a little more than a third of that loss, mostly with low age, low benefit jobs. By June of 2011 the stimulus spending had largely run is course but that seems to have had no stimulating effect on big business. At the end of 2009 U.S. corporations were sitting on $1.6 trillion in cash. As of June, excluding banks and other financial corporations, their hoard had increased to $1.9 trillion.
The stimulus money is gone. State and local governments have lost almost 500,000 jobs since January 2009, more than 160,000 in the first six months of 2011 alone, and massive budget cuts in more than two dozen states whose fiscal years began July 1st will quickly lift those numbers. The federal extension of unemployment insurance will run out in December.
With the conversion of President Obama the argument has been transformed. The debate about raising the debt ceiling was not about whether we should cut public spending during the worst economic recession in 70 years, but about how fast and how much. The debt deal promises to shrink federal spending by more than $2 trillion. The day after the agreement was signed Senator Alan Simpson and Erskine Bowles, cochairmen of the National Commission on Fiscal Responsibility and Reform weighed in with an editorial in the New York Times arguing that federal spending must shrink by more than twice that. As part of the debt ceiling agreement the Congress will vote on a balanced budget amendment to the Constitution.
Reporters are having a difficult time reconciling their new embrace of the proposition that shrinking the economy will grow the economy with the facts on the ground.
The day before the debt ceiling agreement was signed the New York Times headline announced, Optimism on Wall Street. “After an anxious weekend spent glued to their BlackBerrys and Phones, bankers and investors breathed a sigh of relief Sunday as lawmakers forged an agreement to raise the nation’s debt ceiling ahead of Monday’s trading. Wall Street was hesitant to declare a total victory, though, because lawmakers still faced the hurdle of getting a bill through both chambers of Congress.”
The next day, after Wall Street could justifiably declare a total victory, the Times business headline read, World Markets Staggered. But still the reporters held to the superstition of the age. “Market analysis and economist made clear that even though the debt limit agreement averted a potential default on United States debt, the drawnout process had taken its toll.”
Apparently, markets fell because it had taken congress so long to raise the debt ceiling, not because of the substance of the agreement itself.
The day after the agreement was signed the stock market plunged more than 2 percent. The next day it dropped another 2 percent. Two days later it dropped another 5 percent
A fierce symmetry is at work. Congress agreed to shrink public spending by $2 trillion. The next week stock market capitalization plunged by almost $1.5 trillion.
Welcome to the new era of austerity, driven by the superstition of our age. We will grow the economy by shrinking it.