Zandi: GOP Budget Cuts Will Kill 700,000 Jobs

Socialist posits another failure of an argument. He thinks that government overspending what it doesn't have is what creates jobs. Comical!

and how does spending cuts create jobs? For once, how about you actually explain your positinn instead of using bumper sticker slogans?

Spending cuts leads to financially sound government budgets, which leads to confidence that the tax burden will not continue to be unreasonable, which leads to a better business climate for growth. It also removes the fear that the government will increase the money supply, devalue the dollar and lead to inflation.

Take an econ 101 course to educate yourself. Government doesn't create economic productivity. Government doesn't create job growth, the private sector does.

wow, a detailed response. I was not expecting that.

Since when do businesses base their investment and hirig decisions on the federal budget/ deficit? If demand grows, won't they hire more peopel to meet that demand?

Socialist:

1. cant you find a city-owned bus to throw yourself under?
2. doing so would increase employment and government stimulus spending all at the same time
3. it would lead to employment for a personal injury attorney
4. and a judgment which the city would have to pay by increasing taxes
5. the process might be painful for you in the short run, but you could die a happy mam

Even the WSJ can't find an economist to disagree with Zandi, the CBO, or all the Wall Street banks. The best they could do was a historian, who cherry-picked examples not resembling our current situation. LIC, I am 100% certain, cannot come up with an example of a country with high unemployment and low inflation and a protracted downturn where CUTTING government spending helped growth in the short term. (12-24 months.) Crickets.

Germany, last year.

I've posted several times the statement from over 200 economists that the Keynesian spending policies are bad for the economy.

Demand doesn't "grow" from federal borrowing in order to deficit spend. That has NEVER worked.

jason, you really don't know enought to comment on economics on a high level. And Socialist is a wacko who exploits murdered children to make a political point on this forum.

Germany had a BIGGER stimulus than us as a percent of GDP you fucking dummy. Their budget cuts start THIS year. You idiot.

Furthermore, the US has grown to a higher GDP than its pre-recession levels, Germany still has not...because its economy fell FARTHER than ours. You fucking retard.

hey rb345--you will remain as miserable as you are now, and your death (whether by bus or whatever) will be a crescendo of the ongoing misery represented by your life--enjoy

jason, you should know better than to try to challenge LIC to any discourse beyond soundbite jousting!!

LIC is welcome to go to any site such the Economist or a Bloomberg terminal and verify these basic facts.

From the NY Times, August 2010:

BERLIN — Germany has sparred with its European partners over how to respond to the financial crisis, argued with the United States over the benefits of stimulus versus austerity, and defiantly pursued its own vision of how to keep its economy strong.

Statistics released Friday buttress Germany’s view that it had the formula right all along. The government on Friday announced quarter-on-quarter economic growth of 2.2 percent, Germany’s best performance since reunification 20 years ago — and equivalent to a nearly 9 percent annual rate if growth were that robust all year.

The strong growth figures will also bolster the conviction here that German workers and companies in recent years made the short-term sacrifices necessary for long-term success that Germany’s European partners did not. And it will reinforce the widespread conviction among policy makers that they handled the financial crisis and the painful recession that followed it far better than the United States, which, they never hesitate to remind, brought the world into this crisis.

From e21:

As the International Monetary Fund (IMF) explains in its 2010 review of the German economy, “Germany’s strong export orientation stems from the openness of its economy, its long-standing manufacturing traditions and its competitiveness in global markets.” After enduring nearly a decade of slow growth and low inflation, Germany has disinflated its way to an extremely competitive position thanks to painful labor market reforms. . . .

In June, the German government announced an austerity package that provided the private sector with a clear and unambiguous message that public debt levels would not grow unsustainably. This likely instilled confidence in the private sector by reducing households and businesses’ estimates of the burden of government, which leads to an increase in consumption and investment.

Ironically, the recent enactment of the $26 billion bill to increase aid to states in the U.S. likely help back private sector growth rather substantially in many states. Empirical work from the IMF has found nonlinear responses from households as budget situations deteriorate. Simply put, the private sector responds to an additional dollar of debt much differently depending on the perceived sustainability of public finances. In states like California, where the deficit is exceedingly large and of a structural nature, federal funds allow state officials to delay the day of reckoning. This may allow more state workers to remain employed, but does nothing to attenuate the uncertainty facing businesses concerned about how tax rates will be adjusted to close the deficit. While the reduction in public sector payrolls absent stimulus would undoubtedly crimp demand. This is likely more than offset by the private sector investment and consumption lost from a continuation of the unsustainable status quo. In these situations, large spending cuts can offer the most reliable stimulus because of the signal to the private sector that less of its future earnings will be needed to finance government.

It has been distressing to watch analysts blame the lackluster recovery in the U.S. on an insufficiently large stimulus. Both historical and contemporaneous data suggest that the problem may just be the broader concept of a debt-financed stimulus. The German GDP growth rate is an important reminder to U.S. policymakers that a dynamic system as complex as the U.S. economy cannot be reduced to simple algebraic equations that suggest the road to economic growth is paved through increasing amounts of public expenditure.

W:

Socialist is using this site for policital spam. He is welcome to his opinion, and to
express it, but that's what Craigslist "raves and rants" is for.

I agree with LIC: his posts are drivel, and deliberately assert disningenuous arguments
and claims, all of which are based on his unstated and morally indefensible premise that
those people who work, produce and/or create should be slaves to a government which is
entitled to confiscate 100% of their earnings - or more - to re-distribute to or for the
benefit of voters whose votes it is in effect buying with promised handouts.

There is a tremendous personal and health cost caused in part by excessive governmental
interference in, regulation of and taxation of the private section: depression, stress-
induced physical disorders such as stroke and hypertension, marital discord, child and
spouse abuse, alcohol and drug abuse, and suicide.

Just last night I spoke to an unemployed tenant who had considered suicide the night
before. I'm trying to help her get a new job, which is something I've done for years
since Obama's attempt to establish a socialist one-party state in this country
triggered the depression which we've gone through the last few years and are now
exiting thanks to the Republican take-over of the House.

It really is time that leftist re-distributionists and nanny-staters took moral responsibi-
lity for the policies they espouse, such as OmamaCare's health deform. In the real world
beyond Manhattan Starbucks' lattes, that one irresponsible law has harmed the health of
untold tens of millions of Americans, such as:

1. those whose Medicaid benefits are now being cut or eliminated for increased cost reasons
2. union members whose corporate prescription drug payment plans are being eliminated
3. the untold tens of millions who are forced to worry about how to pay their other bills
and still finance Obama's imperial health plan so that their dramatically increased
premiums are employed to subsidize other health consumers, such as lifetime drug abusers
with serious pre-existing medical problems.

What I said about Socialist was sarcasm. I really dont want him to throw himself under a
city-owned bus: the resulting judgment would cause my taxes to be increased.

As a believer in capitalism, I believe in private sector solutions to public nuisances.
Therefore I would want him to throw himself under a privately-owned bus.

NY Times, July 2010:

IN many countries, including the United States, there are calls for the government to spend more to jump-start the economy, and to avoid the temptation to cut back as debts mount.

Germany, however, has decided to cast its lot with fiscal prudence. It has managed rising growth and falling unemployment, while putting together a plan for a nearly balanced budget within six years. On fiscal policy and economic recovery, Americans could learn something from the German example. . . .

Keynesians have criticized fiscal caution at this point in the economic cycle, arguing that fiscal stimulus will give economies more, not less, protection against adverse events. But is that argument valid?

Certainly, in Germany, the recent history of fiscal stimulus wasn’t entirely positive. After reunification in 1990, the German government borrowed and spent huge amounts of money to finance reconstruction and to bring East German living standards up to West German levels. Millions of new consumers were added to the economy.

These policies did unify the country politically but were not overwhelmingly successful economically. An initial surge was followed by years of disappointing results for output and employment. Germany’s taxes remain high, and overall West German living standards failed to rise at the same rate as those of most other wealthy countries.

Persuading former East Germans to spend more as consumers turned out to be less important than making sure that they had the skills to mesh with the economic expansion of the country. It is no surprise that many Germans are now skeptical about debt-financed government spending or excessive reliance on domestic consumers.

In recent times, Germany has shown signs of regaining a pre-eminent economic position. Policy makers have returned to long-run planning, and during the last decade have liberalized their labor markets, introduced greater wage flexibility and recently passed a constitutional amendment for a nearly balanced budget by 2016, meaning that the structural deficit should not exceed 0.35 percent of gross domestic product.

Spending cuts led to economic growth in Canada too. From the Times UK:

Alberta’s hospital closures were part of a tidal wave of public spending cutbacks that swept Canada in the 1990s as the country attempted to grapple with a crippling national debt that had spun out of control, reaching roughly 70 per cent of GDP by 1993. Canada’s net public debt stood at $508 billion (£341 billion) — one of the world’s most richly endowed countries in natural resources, was going bust.

The solution it chose — savage public spending cuts over a short period — brought about dramatic change. Within three years the budget deficit was cut to zero and Canada remained in the black, running surplus budgets until 2007 to 2008, when the global recession hit.

http://www.msnbc.msn.com/id/30363790/

Misery below the surface, perhaps? Not at the bustling Fuerstenberger home just outside Heidelberg, where little has changed for the family's four children despite neither parent currently working.
“If we were in Detroit, we could worry every minute,” said Sarah Fuerstenberger, 37. “But here, we’re safe because of the system."
While economic forecasts are just as dire on this continent as in the United States, Germany’s citizens — and, indeed, most across western Europe — can count on a broad government safety net that includes generous unemployment checks, universal healthcare and inexpensive university education to tide them over.
“The German government is really good about taking care of people; we know we won’t be starving one way or another," she added.
...

Europe fiercely resisted President Obama's calls for it to increase its stimulus programs last month at the Group of 20 industrial and developing nations summit in London. That’s because leaders here argue that their existing social welfare initiatives are already keeping people afloat as well as stimulating demand.

The NY Times, April 2010:

The macroeconomic evidence also suggests the wisdom of emphasizing spending cuts. In a recent paper, Alberto Alesina and Silvia Ardagna, economics professors at Harvard, found that in developed countries, spending cuts were the key to successful fiscal adjustments — and were generally better for the economy than tax increases. Their conclusion was based on data since 1970 from the Organization for Economic Cooperation and Development.

The received wisdom in the United States is that deep spending cuts are politically impossible. But a number of economically advanced countries, including Sweden, Finland, Canada and, most recently, Ireland, have cut their government budgets when needed.

Most relevant, perhaps, is Canada, which cut federal government spending by about 20 percent from 1992 to 1997. The Liberal Party, headed by Jean Chrétien as prime minister and Paul Martin as finance minister, led most of this shift. Prompted by the financial debacle in Mexico, Canadian leaders had the courage and the foresight to make those spending cuts before a fiscal crisis was upon them. In his book “In the Long Run We’re All Dead: The Canadian Turn to Fiscal Restraint,” Timothy Lewis describes Canada’s move from fiscal irresponsibility to a balanced budget — a history that helps explain why the country has managed the current global recession relatively well.

Jason, now that I've cited to various sources that show how idiotic your comments are, do you want to start cursing and calling me names again?

"I'm trying to help her get a new job, which is something I've done for years
since Obama's attempt to establish a socialist one-party state in this country
triggered the depression which we've gone through the last few years"

I thought the recession/ depression started in December of 2007? Your entitled to your own opinion, but not your own facts.

"and are now exiting thanks to the Republican take-over of the House."

What specifically have the House Republicans done to fix the economy since they got elected? Can you name one bill that they passed and has been signed into law? The Republicans are wasting time passing bills that they know perfectly well are dead on arrival in the Senate.

"Spending cuts led to economic growth in Canada too."

Canada was able to cut spending because they have govternment run Socialized single payer healthcare. Thanks for proving that socialized medicine works.

actually rb345 I was thinking of jumping off of a tall government owned building right onto you. I thought it would be more fun if we go together.

Socialisr:

Name the street corner and the date and time and I will be there. I'll
even wear a global positioning system transponder to help you improve
your aim. And, consistent with my philosophical beliefs, I will waive
Medicaid and government payment of my medical bills should I survive.

You, on the other hand, dont seem likely to be able to make the same
pledge, particulalry if you jump from the 20th floor or higher.

In any event, I look forward to your dropping in on me. If it's not too
much of a bother, please bring flowers. Even if we miss each other, they
will still serve a useful purpose.

Socialist, if you have to keep asking everyone here to teach you basic economics, why don't you just finally go and take a class.

Germany put together a plan to cut the deficit by 2015. The spending cuts START this year, 2011.

Canada was NOT as I described above.

Notice Germany's debt as a percent of GDP has been GROWING through 2011:

http://www.gfmag.com/tools/global-database/economic-data/10394-public-debt-by-country.html#axzz1FNs96GWS

And not, scroll chronologically for GDP shrinkage/growth....

http://www.gfmag.com/tools/global-database/economic-data/10306-gdp-growth-for-the-major-economies-of-the-world-2000-2010.html#axzz1FNs96GWS

Duh.

I am working in London this week and have to get up early for meetings. I assume this will be on comment 100 by the time I get back to this...

No country with a for profit employer based healthcare system can ever make meaningful spending cuts. That's a fact.

Most countries had a growing ratio as GDP declined. How was Germany relative to others? How is it compared to 15 and 20 years ago? C'mon jason, think a little.

Socialist, you're wrong: a country with a for-profit employer-based healthcare system can make meaningful cuts to education, infrastructure, and stability-creating safety nets, and to the prosperity of the middle class and working class, and to the suffering of the criminal classes at the top of the economic pyramid.

>Socialist, you're wrong: a country with a for-profit employer-based healthcare system can make meaningful cuts to education, infrastructure, and stability-creating safety nets, and to the prosperity of the middle class and working class, and to the suffering of the criminal classes at the top of the economic pyramid.

Is there a cutoff for the criminal class? 41 hours a week? a B+ or higher in high school? a little hustle?

Socialist, what about the Sequester?

Socialist? Hopefully you aren't traveling anywhere by plane right now.