Jul 31, 2011

I'm with Krugman

Today's round table discussion on ABC’s "This Week" with a bunch of people laying down their bets:

We shouldn’t even be talking about spending cuts right at all now. We have 9% unemployment. These spending cuts are going to worsen unemployment. It’s even going to hurt the long run fiscal picture, because we have a situation in which more and more people are becoming permanent long term unemployed, and if you have a situation in which you are going to permanently raise the unemployment rate, which is what this is going to do that’s actually going to reduce future revenue, so these spending cuts are ever going to hurt the long run fiscal position let alone cause lots of misery, and then on top of we’ve got these budget cuts which are entirely, basically the Republicans [saying] "we’ll blow up the world economy unless you give us exactly what we want," and the president said, "ok". That’s what happened.

On cutting spending without increasing revenues:
We’re looking; I mean we used to talk about the Japanese and their lost decade. We’re going to look to them as a role model. They did better than we’re doing. This is going to go on. I have nobody I know who thinks the unemployment rate is going to be below 8% at the end of next year. With these spending cuts, it might well be above 9% at the end of next year. There is no light at the end of this tunnel, and the revenue debate in Washington, which is all about gee, we’re going to make this economy worse, but are we going to make it worse on 90% of the Republicans’ terms or 100% the Republicans’ terms and the answer is 100%.

Like I have said before, I am no economist, but the above should be plain as the nose that some are cutting off to spite their face. In fact, I'm betting on it.

You can convince me differently, once you explain how cutting spending is required to boost employment in this weak economy, or how without lowering unemployment you are going to have growth.  By growth I mean increase in the US GDP, because without that, you do not stand a chance of generating enough revenues to cut down the big ass debt, even if you cut 2-3 trillion in deficits over a decade.

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