I agree with Brian Beutler at Salon that the GOP is opposing an extension of unemployment benefits because they don’t want to do anything to help the economy — besides helping the affected families, an extension would create jobs and raise GDP.
From “GOP’s ulterior motive on unemployment: Economic sabotage?”:
“Congress has never cut off these benefits when unemployment has been as high as it is right now, and the long-term unemployed and chronically poor aren’t equivalent populations. So there’s got to be more going on than just conservative indifference.
“Some Republicans would claim the deficit is too high to renew benefits, but we know that’s not true because the deficit is shrinking fast, and there are myriad, painless ways to defray the cost….
“Unemployment benefits make people’s lives better and buoy a fragile, but possibly accelerating recovery. Some Republicans are apparently reluctant to give Democrats and the economy a shot in the arm right now.”
There are no principles involved here, just pure politics. From now on, it’s going to be all about the GOP retaking the Senate, and after the mid-terms, it’s going to all about the GOP retaking the White House. No governing, just campaigning.
The deficit for FY 2013, which ended on September 30, was $680 billion. To economists, what matter is not the amount of the deficit, but what percentage of GDP it represents. In this case, it’s 4.1% of GDP.
For FY 2009, the deficit was 10.1% of GDP. So the deficit has fallen by more than half.
Right now, our most immediate concern is (or should be, GOP) jobs, not the deficit. Yes, we have longer-term deficit problems, but the most important thing to do now is not to make those future deficits worse by failing to create jobs. To the extent we do that, we generate more tax revenue and we reduce demand for unemployment benefits, Medicaid, and food stamps, so the government automatically gets more and spends less without cutting the safety net or raising taxes.
GDP growth for the first quarter of 2013 has been revised down, from 2.4% to 1.8%.
When the number was initially reported as 2.4%, the Powers That Be said the stupid sequester and the tax increases that kicked in on January 1st weren’t having much of an effect on the economy. The Powers That Be were obviously wrong.
There is some really good news out of Washington, if you look under the rocks of Benghazi, the IRS, and the AP.
The budget deficit is projected to drop to $642 billion for FY 2012, which ends on September 30. That’s a whopping $200 billion less than the CBO estimated in February, when it adjusted the deficit downward to account for sequester spending cuts and 2012 tax increases. This new projection comes strictly from higher-than-expected tax revenue. This will be the first time the deficit has been under a trillion since 2009.
Things are so rosy that the deficit might be only a smidge over 2% of GDP by 2015, compared to more than 10% of GDP back in 2009.
In fact some economists, like Jared Bernstein, think the deficit may be coming down too quickly, keeping unemployment high.
“Yes, total debt in the U.S. economy, public and private combined, has risen dramatically relative to G.D.P. No, this doesn’t mean that we as a nation have been living far beyond our means, and must drastically tighten our belts. While we have run up a significant foreign debt (although not as big as many imagine), the rise in debt overwhelmingly represents Americans borrowing from other Americans, which doesn’t make the nation as a whole any poorer, and doesn’t require that we collectively spend less. In fact, the biggest problem created by all this debt is that it’s keeping the economy depressed by causing us collectively to spend too little, with debtors forced to cut back while creditors see no reason to spend more.
“So what should we be doing? By all means, let’s restore the kind of effective financial regulation that, in the years before the Reagan revolution, helped deter excessive leverage. But that’s about preventing the next crisis. To deal with the crisis that’s already here, we need monetary and fiscal stimulus, to induce those who aren’t too deeply indebted to spend more while the debtors are cutting back.
“Unemployment, not excessive money printing, is what ails us now — and policy should be doing more, not less.” Emphasis added.
This could be a true bounce-back year for the economy, with the recovery really gathering steam. Housing, which has been such a drag on GDP for six years, is finally expected to add to GDP, by about 1%. Just as a downturn feeds on itself and takes us spiraling down, a definitive upturn would feed on itself and lift us up higher and faster. More consumer spending leading to more jobs, leading to more consumer spending and even more jobs.
The sequester looms on March 1, with the GOP saying they won’t raise taxes and will accept only spending cuts, and the Dems saying there must be a combination of cuts and taxes. Without an agreement, the automatic cuts will start draining billions of dollars a month from our economy.
And by the end of March, government funding under the continuing budget resolution will run out, and we face the possibility of a government shut down.
So we could quickly and needlessly slide back into recession.
It is ironic that as the private sector comes back, the government-hating GOP may use government power to depress the functioning of the free market and give the “invisible hand” a vicious slap.
But they believe they have to destroy our economy in order to save it.
“I would say in a country with $50,000 of GDP per person, that nobody should be hungry, nobody should lack a good education, nobody should be worried about medical care, you know, nobody should be worried about their old age.”