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Austerity Is Dead So Can We Fix The Infrastructure Now

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Before the financial collapse economists had nailed down they way to get out of an economic crisis:


Government has to spend to pick up the drop in demand caused by businesses and consumers cutting back. This investment into the economy causes businesses to hire again, which helps people to be able to spend again, and after things recover the resulting growth pays off that investment.


The Great Depression in particular had taught us that a downward spiral could develop in which a drop in demand caused businesses to cut back, lay people off and/or cut wages, and of course this caused people to have to cut back, which meant demand dropped even more so businesses laid off more people, so demand dropped more, etc.


The FDR administration tried various things to stop this spiral and found that programs that injected money into the economy, such as unemployment benefits and other assistance, direct hiring, investments in infrastructure, etc., could turn things around. And then after things turned around we had all that new, modern infrastructure driving continuing economic growth!


We also learned the hard way. In 1937 the government cut back too soon, and the economy sank into recession again. Then World War II came along, the government spent massively, and the economy grew so much that the ratio of debt to the size of the economy shrank dramatically. We had it figured out.


The “Obama Stimulus”


At the end of the ‘W’ Bush administration the economy was again in free fall. (Thanks George!) The month President Obama took office the economy lost more than 800,000 jobs. The new Obama administration pushed through a “stimulus” program that included infrastructure investment, tax cuts, and money to help states avoid laying off teachers, police, etc. See if you can spot on this chart the point where the stimulus “kicked in.” (Click for larger and details.)




That’s right, the point where things suddenly turn around and that deep ‘V’ starts back up – that’s when the stimulus kicked in. It worked. It wasn’t enough, but it worked.


The “Serious People” Threw Out What Had Been Learned


Somehow, even with this obvious evidence that the stimulus worked the “serious people” in Europe and America threw out what economists had learned about how to get out of an economic crisis and demanded budget cuts instead. They actually claimed, in the face of the economy collapse, that the unemployment and slow economy was the result of “government spending.” They actually claimed that taking government money out of the economy would somehow help the economy.


Since 2010 Republicans have blocked further stimulus, claiming that we have a deficit emergency and “we’re broke.” In fact, they have forced deep cuts in spending, including the destructive “sequester” that is forcing down the level of recovery and looks like it will cost as many as 750,000 jobs just this year. And after this year it gets worse.

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Are these the same economists that predicted the "stimulus" would keep us from reaching 8% unemployment and that we'd be down to 5% now? :lol::lol: :lol: :lol::lol::lol::lol: It appears their "predictions" were slightly off....


Did you read the new report from the San Francisco FED that claimed the continued sluggish economy will be based on Obama's higher taxes and NOT the sequester?


Surprisingly, despite all the attention federal spending cuts and sequestration have received, our calculations suggest they are not the main contributors to this projected drag. The excess fiscal drag on the horizon comes almost entirely from rising taxes. Specifically, we calculate that nine-tenths of that projected 1 percentage point excess fiscal drag comes from tax revenue rising faster than normal as a share of the economy.

Read more: http://www.americanthinker.com/blog/2013/06/fed_study_shows_tax_increases_not_spending_cuts_are_slowing_the_economy.html#ixzz2VwYueWU7
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5 years into the great recovery, and they are STILL calling for more deficit spending because Obama's policies have failed miserably.

And they don't understand the irony.


Well.... they didn't understand it for decades after the Great Depression either. SOME still don't.

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