October 31, 2013
That is what the NYT told readers in its budget piece today. Apparently because people who matter in Washington have little concern about large numbers of unemployed and underemployed people, as well as the upward redistribution of income, the NYT said that members negotiating over the budget feel no need to create jobs and boost economic growth. While business groups and their allies at major news outlets like the Washington Post and National Public Radio are placing enormous pressure on members of Congress to cut Social Security and Medicare, there are no important lobbies to push for policies to restore full employment and normal wage growth.
As a result, this piece presented no views from an economic perspective, which would have pointed out that the drive to reduce the budget deficit is a drive to slow the economy, increase unemployment, and lower wages. There is no plausible story whereby private sector demand will replace demand from the government in the current economy. This means that if the government cuts spending by $100 billion, then we will see roughly $100 billion less in demand. Since much of this money would have been respent (workers spend their wages), this implies a reduction in GDP of around $150 billion, a bit less than 1 percent. The job loss associated with this cut would be around 1.3 million.
It would have been useful to include some discussion from an economic perspective so NYT readers would realize that both parties are debating proposals to slow the economy and throw people out of work.
Comments