Republicans Continue to Lie About the Economy

Boy, Republicans tell a lot of lies, but the biggest is the Republican’s economic lie. According to Senate’s #1 Republican, the budget deficit is “the transcendent issue of our time.”

Of course this is the same man who also proclaimed that his primary goal for the United States Senate–despite the country being in the worst recession since the Great Depression–was to make the U.S. President a one-term anomaly. How’d that work out?

In his own words, Mitch McConnell claims that balancing the budget will solve America’s economic problems. Supply and demand? Just a bunch of worthless theory I guess.

Big lies can do irreparable harm in a democracy that is fighting and clawing to survive. The economic lie is the one Republicans are depending on in their coming showdowns. But the real damage is that it could keep the economy in constrained as an eighteen-wheeler’s first gear for years, right up through the 2014 midterm elections and quite possibly all the way to the next presidential election in 2016..

Maybe That’s Exactly What They Want

It’s certainly no surprise that Republicans will do or say anything to regain control of Congress and the White House.  After the 2008 housing bubble burst under George W. Bush, American consumers had to tighten their belts so tightly that consumption plummeted. When demand fals as precipitously as it has the 2008 crash, unemployment has stagnated. For every private sector job we gain, Republican Governors, states, and members of Congress have made sure that a public sector job has been lost.

Consumer spending accounts for 70 percent of economic activity in the U.S. and business simply cannot keep people employed without enough customers, and none will hire people back until consumers return. It’s just that simple.

That meant government needed to step in as not only a consumer of last resort, which it did, but as an employer of last result as well. It simply does not have enough support from Republicans to make up for the gaping shortfall in consumer demand. And Republicans are determined to keep it that way until they can convince enough people that that it’s the deficit not lack of demand, which is keeping the economy in quicksand.

The result has been one of the most anemic recoveries on record. In the three years after the Great Recession ended, economic growth averaged only 2.2 percent per year. In the last quarter of 2012 the economy contracted. Most of the contraction came from defense contractors laying off tens of thousands of workers because it looked as if the sequestration cuts in government spending across-the-board was going to be forced on the U.S. due to blatant Republican obstructionism.

In the wake of the previous ten recessions the U.S. economy grew on average at 4.6% per year -twice as fast as this time because those recessions were not met by Republican leaders whose sole purpose was to unseat a sitting President. Those Congressmen and Congresswomen actually had the health and stability of the U.S. economy at heart—not an irrational, seething, all-consuming, political motive for their actions.

Congress for All Americans—What a Concept

It used to be that the deeper the recession, the faster the economy would rebound. But that was when the U.S. Congress, despite differences of opinions, had the good of all Americans as their reasons to serve as representatives of their country.

The Great Depression bottomed out in 1933. In 1934, the economy grew more than 8 percent; in 1935, 8.2 percent; in 1936, almost 14 percent.

Not this time. Why? Because unemployment is still sky high due to the reasons state above. If the Republican states and Congress weren’t laying off government workers as fast as the private sector could hire people, we would have had a robust recovery by now as well.

The current official rate of 7.9 percent doesn’t include 8 million people (5.6 percent of the workforce) working part-time who’d rather be working full time. Nor those too discouraged even to look for work. Combined with 10,000 baby boomers who are retiring PER DAY,  the ratio of workers to non-workers in the adult population is lower than any time in the last thirty years.

Just last year, 8.9 million Americans decided that starting their own business was the only way for them to start receiving income since there was an insufficient number of available jobs.

Wages continue to drop because the only way many Americans can find (or keep) jobs are by settling for lower pay. Most new jobs created since the depth of the Great Recession pay less than the jobs that were lost. That’s why the real median wage is now 8 percent below what it was in 2000.

Republicans who say the budget deficit is responsible for this are either ignorant of the facts, lying, or in deep denial. Consumers still don’t have the jobs and wages, nor ability to borrow, they had before the recession. So their belts are tight, their wallets are closed, and their willingness to purchase is clamped down like a dog with the only bone in the neighborhood.

To make matters worse, the temporary cut in Social Security taxes ended January 1, subtracting an additional $1,000 from the typical American paycheck.

Under these circumstances, government deficits are not the problem. They are ONE problem to be sure; but they are far from the most urgent problem.

What Republicans Do Not Want You to Know

If Republicans being honest, they’d see how fast the deficit is already shrinking. It was 8.7 percent of the Gross Domestic Product in 2011. The Congressional Budget Office forecasts it will shrivel to 5.3 percent by the end of 2013 if we go over the fiscal cliff on March 1, and some $85 billion is cut from this year’s federal budget. Even if March’s fiscal cliff is avoided, the CBO expects the deficit to shrink to 5.5 percent of the GDP, in light of deficit reduction already scheduled to occur.

This is not something to celebrate. It translates into a significant drop in demand, with nothing to pick up the slack.

In the fourth quarter of 2012, the economy contracted, because of a steep drop in defense spending. That may have been an abnormality; no one expects the economy to contract in the first quarter of 2013. But we’d be foolish to rule out a recession later this year.

Contrary to what Mitch McConnell would have us believe, the budget deficit and cumulative debt are not the “transcendent issue of our time.” The transcendent issue is jobs and wages. Cutting the budget deficit now will only result in higher unemployment, lower wages, and more suffering.

Harvey A. Gold

 

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