New estimates from the nonpartisan Congressional Budget Office suggest that increasing aid to the unemployed could be the best policy for near-term job creation in the United States. Tax breaks for businesses, infrastructure spending, meanwhile, are not likely to boost short-term growth.
Just take a minute to think about waht that sentence says. The economy is in such a mess, that tax breaks for businesses and infrastructure spending are not likely to boost short-term growth; only increasing aid to the unemployed would boost short-term growth.
What a stunning state of affairs.
This week’s estimates come as the country simultaneously faces an economic crisis and a deficit crisis. GDP growth was at a sluggish 2.5 percent annual rate in the third quarter, and the unemployment rate has been stuck at or above 9 percent for seven months.
Meanwhile, the so-called congressional super committee is an abject failure as practically everyone with an attention span over two minutes has known it would be since the entire stupid process began.
The difficulty of this situation was highlighted at a Senate Budget Committee hearing on Tuesday, when CBO Director Douglas Elmendorf told senators that short-term spending increases and tax cuts are likely the best paths to growing the economy, as long as they are offset by medium- and long-term adjustments to government spending. “Under current policies, U.S. fiscal policy is on an unsustainable path,” Elmendorf said.
An “unsustainable path,” Elmendorf said. Yet the slaves to the bribery of Grover Norquist, otherwise known as Republicans, continue to keep their pledge to Mr. Norquist while ignoring their pledge of allegiance to America.
When committee Chairman Kent Conrad, a North Dakota Democrat, asked how increased spending now could ultimately benefit the economy, in light of current ballooning deficits and debt, Elmendorf responded that it will be crucial for the country to balance short- and long-run economic needs. “It’s not really a paradox,” Elmendorf told the committee, later explaining, “In the short term, most economists agree the constraint on our output and incomes today … is principally weak demand for goods and services.”
Increasing that demand, therefore, is the key to growth, he said: “In the short term, what can strengthen the economy is cuts in taxes or increases in spending.”That boost to demand may have to come soon; unemployment benefits for the long-term jobless are set to expire at the end of the year and lawmakers are currently fighting over the process of passing an extension.
Elmendorf acknowledged that some policies are more effective over the long term than the short term, with infrastructure as one key example. Conrad emphasized the importance of infrastructure in his home state, where he says a booming oil industry requires better transportation routes. “We need to build roads. That could employ thousands of people,” Conrad said.
Elmendorf agreed that infrastructure spending does not create significant jobs in the short term, simply because of the sometimes lengthy processes of identifying and approving projects, but said that in the longer term the effects can be larger.
Members of Congress seem to agree that economic growth is priority No. 1 in the United States. Agreement on how to achieve that is elusive, however, and the CBO had little guidance for overcoming the roadblock. When Delaware Democratic Sen. Chris Coons asked Elmendorf to list the three best fiscal policies for growth that could also attain bipartisan support, Elmendorf demurred. “Senator, I’m about the 10,000th most politically knowledgeable person within five miles of this building. So I’m not the person you’d want to ask about what’spolitically viable.” He added, “All we can do is to offer our analysis of what we think is more or less effective.”
If the congressmen and women that are elected to serve this country cannot see anything beyond their own re-elections, we should summarily dismiss them to the corporate world they seem to view with such high regard.