Economic Policy Wars by Ryan Rhoades

So let me get this straight.

We are in the worst economic downturn since the Great Depression.  The national unemployment rate stands at 9.5%, is at least 10% in 128 metropolitan areas and over 15% in twelve of the largest urban areas.  The ratio of unemployed persons to job openings stood at 5.4 to 1 in January, slightly lower than in December, when the ratio was six-to-one1.

Teachers, police officers and other service workers are getting laid off, taking pay cuts or getting furloughed.  Since August of 2008, over 180,000 local government jobs have been lost.   Estimated projections show that local public-sector job losses are only going to increase through 2012 due to budget cuts2.

With all this happening now, some politicians, news commentators and pundits are preaching fiscal austerity – suddenly concerned about the deficit and our national debt.

I say suddenly because many of the same people calling for reducing the national deficit by cutting programs and gutting state budgets were suspiciously silent during Bush’s rampage on the economy.  For instance, the Center on Budget and Policy Priorities found that , “just two policies dating from the Bush Administration — tax cuts and the wars in Iraq and Afghanistan — accounted for over $500 billion of the deficit in 2009 and will account for almost $7 trillion in deficits in 2009 through 2019, including the associated debt-service costs”3.

These critics – mostly Republicans but more specifically fiscal conservatives supportive of ‘Reaganomic’ policies – are intent on cutting government spending while also calling for the renewal of Bush’s tax cuts on the wealthiest Americans.  Bush’s tax cuts are set to expire this year.  In 2008 alone, the tax cuts for the wealthiest 1% totaled $79.5 billion4.  That’s enough money to hire well over 2 million workers for one year on a modest $35,000 salary.  Such a jobs creation program reminiscent of the New Deal is clearly more important than extending tax cuts for the superrich. Read more of this post

ZCommunications | We’re In A One-and-a-half Dip Recession by Robert Reich | ZNet Article

ZCommunications | We’re In A One-and-a-half Dip Recession by Robert Reich | ZNet Article.

We’re not in a double-dip recession yet. We’re in a one and a half dip recession.

Consumer confidence is down. Retail sales are down. Home sales are down. Permits for single-family starts are down. The average work week is down. The only things not down are inventories – unsold stuff is piling up in warehouses and inventories of unsold homes are rising – and defaults on loans.

The 1.5 dip recession should be causing alarm bells to ring all over official Washington. It should cause deficit hawks to stop squawking about future debt, blue-dog Democrats to stop acting like Republicans, and mainstream Democrats to get some backbone.

The 1.5 dip recession should cause the President to demand a large-scale national jobs program including a new WPA that gets millions of Americans back to work even if government has to pay their wages directly.

Included would be zero-interest loans to strapped states and locales, so they didn’t have to cut vital services and raise taxes. They could repay when the economy picked up and revenues came in. The national jobs program would also include a one-year payroll tax holiday on the first $20,000 of income.

The President should stop talking and acting on anything else – not the deficit, not energy, not the environment, not immigration, not implementing the health care law, not education. He should make the whole upcoming mid-term election a national referendum on putting Americans back to work, and his jobs bill.

Are you for it or against it?

But none of this is happening. The hawks and blue dogs are still commanding the attention. Herbert Hoover’s ghost seems to have captured the nation’s capital. We’re back to 1932 (or 1937) and the prevailing sentiment is government can’t and mustn’t do anything but aim to reduce the deficit, even though the economy is going down.

It looks like there’ll be an extension of unemployment benefits. (If it weren’t for the human suffering involved, I wish the Republicans had been forced to filibuster that bill all summer and show the nation just how much they care about people without jobs.) But the fiscal stimulus resulting from this will be tiny. Jobless benefits are humane but they alone don’t get jobs back.

And what about the Fed? It’s the last game in town. The 1.5 dip recession should cause Ben Bernanke to revert to buying mortgage-backed securities, buying Treasury bills, buying anything that will get more money into circulation.

But the Fed chair continues to talk about pulling money out of the system and raising short-term rates as the economy improves. During Wednesday’s appearance before Congress he made it clear monetary policy won’t be loosened; it just won’t be tightened for a while. And he reiterated that deficits were “unsustainable.”

He admitted unemployment would probably remain high for a long time, and the likelihood of growth was “weighted to the downside,” which in Fed-Speak means we’re still in trouble. And he said the Fed still has the tools to do what’s needed if the economy needs more help.

But would he use the tools now? No. “We need to look at them carefully to make sure we’re comfortable with any steps that we take.” This is like the captain of the Titanic looking carefully at his lifeboats to make sure he’s comfortable with using them as the ship starts sinking.

Pew Research Center – The Great Recession

This report shows the effects of the Great Recession as presented by the Pew Research Center.

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How the Great Recession Has Changed Life in America