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Sen. Warner: Deficit Reduction Key to Jump Starting Economy

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I must say, it’s very disappointing to hear Mark Warner repeat the Republican line that the only way to jump start our economy is to reduce the long-term, structural deficit. In fact, the correct answer from a macroeconomics point of view is that the long-term structural deficit has basically nothing to do with the current unemployment situation. That’s why fixing the long-term structural deficit, while essential in its own right, isn’t the answer to the current unemployment situation.

To be clear, I strongly believe we need to deal with our long-term structural deficit. However, we need to remember what the causes are of that problem. Start with the fact that we had a surplus when George W. Bush took office. That was wiped out by a combination of massive tax cuts (cost: $4 trillion a decade), two wars that were not paid for (cost: probably into the trillions when it’s all said and done), a nasty economic recession caused in large part by Republican deregulatory policies on Wall Street, and the recovery measures taken to try and save us from Great Depression Part Deux. Add in an aging population, the highest health care costs in the world, and the lowest federal taxes since 1950, and there you have it. Yet I don’t hear Mark Warner or the “Gang of Six Five” pushing to repeal the Bush tax cuts, etc.

That’s a major problem in and of itself. Now, Warner’s compounding that problem by pretending that a solution to the long-term structural deficit will somehow reduce the current unemployment rate. Maybe I missed that in graduate level economics, but I’m sure politicians know better. Heh, and if you believe that one… 🙂

  • normanva

    You must mean republican politicans.  If we would just do away with all regulations and all government social programs and lower taxes, we would balance the budget and unleash the free markets that would carry us unto an unbelievable world of power and prosperity, at least according to republican economic theory.  Don’t believe a word of it, I haven’t been seduced yet.

    This is the best explanation that I have found from John Thomas, hedge fund trader (I read the free section every day).

    Let me give you a simple English lesson here. Spending cuts means job losses. Reducing the deficit means job losses. Balancing the budget means job losses. Austerity means job losses. And lots of job losses means slower economic growth. This reports shows that for every two workers hired by the private sector, one is fired by the government, leaving us with net job growth that is meager at best. Since the jobs recover started 18 months ago, the private sector has added an impressive 2.2 million, while the government has been shoveling jobs away half as fast.

    This is a major ingredient of my long term forecast that American GDP growth has permanently downshifted from the 3.9% we saw from 2000-2009 to 2% for this decade.

    http://www.madhedgefundtrader….