Krugman: The Threat To The Recovery Is Washington

(h/t Karoli for the video) The threat to the recovery is Washington. There is more truth in those seven words than in the entire 11.5 hours of Sunday news programming we monitor put together. We were at the precipice of a global economic

1 year ago by karoli
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(h/t Karoli for the video)

The threat to the recovery is Washington.

There is more truth in those seven words than in the entire 11.5 hours of Sunday news programming we monitor put together.

We were at the precipice of a global economic catastrophe, thanks directly to Republican policies, at the time that Barack Obama was inaugurated. While it's difficult to gauge success from the absence of devastation, there is no argument that the preemptory measures taken in the early days of the first Obama term did slowly turn the economy around. There's far to go still, especially when it come to jobs, but we're at least moving away from the cliff.

But...

If Republicans still take their marching orders from deep thinkers like Rush that could change. And Carly Fiorina shows the same fundamental understanding of the drivers of the economy that enabled her as a CEO to drive two major American corporations into the ground. For her, we have to keep cutting federal spending because...bureaucrats!

FIORINA: I think it's important to remember when we talk about the economy that a private-sector job and a public-sector job are not the same things. They're not equivalent. I'm not saying public-sector jobs aren't important, but a private sector job pays for itself. A private-sector job creates other jobs. A public-sector job is paid for by taxpayers.

The government does not spend and invest money as efficiently as the private sector. There's all kinds of data to support that. So it isn't simply a matter of saying, well, whatever job is created out there, if it's a bureaucrat in Washington, D.C., or a small-business owner hiring another employer, those are not equivalent thing.

(CROSSTALK)

KRUGMAN: ... when you say public-sector jobs, it is not a bureaucrat in Washington, D.C.

FIORINA: Oh, it is, actually.

KRUGMAN: When we talk about public-sector jobs, we look at the public-sector jobs that have been lost in large numbers in this, it's basically school teachers. Don't think about bureaucrats. It's school teachers. What we've laid off is hundreds of thousands of school teachers.

And we talk about the cuts in public spending that have happened, they are not, you know, some god-awful who-knows-what. It's actually public investment. It's largely fixing potholes and repairing bridges. So, you know, you have this image of these wasteful bureaucrats doing god knows what. What we've actually seen is an incredible drought of basic infrastructure...

FIORINA: And it is a fact...

KRUGMAN: ... and -- and laying off hundreds of thousands of school teachers.

FIORINA: It is a fact that virtually every department in every organization in Washington, D.C., has seen its budget increase for the last 40 years. That money is being paid to hire people. The number of people who are -- of course there are some teachers...

KRUGMAN: Almost -- almost no...

FIORINA: Of course there are some police officers. I'm not saying that.

KRUGMAN: ... the vast bulk of -- the vast bulk of public-sector employees are at the state and local level. They are largely school teachers, plus police officers, plus firefighters.

(CROSSTALK)

KRUGMAN: And your notion that it's all these bureaucrats, that's a myth that is used to...

(CROSSTALK)

FIORINA: It's a fact. It's not a myth. It's a fact.

Words have meanings. Fiorina needs to understand that the word "fact" has a specific definition which is not "partisan talking point" or "my opinion". There is little question that there is bloat in the bureacracies of federal offices. But that isn't where the cutting is happening.

A notable aspect of the July employment report is the decline in public-sector employment. In fact, public-sector employment (i.e. federal, state, and local government jobs) declined in 10 of the past 12 months, in sharp contrast to 29 consecutive months of private-sector job growth. Indeed, falling public employment has been among the largest contributors to unemployment in the United States since the end of the Great Recession.

In this month’s employment analysis, The Hamilton Project examines public-sector employment trends over the last three decades and finds that government employment contracted, both in absolute numbers and as a share of the population, during the Great Recession and throughout the current recovery.

Additionally, we report on the results of a new analysis that finds that the cuts in public school teachers are projected to reduce the future earnings of today’s students by more than five times as much as the current budget savings.[..]

Total government (i.e., the sum of state, local, and federal) employment has decreased by over 580,000 jobs since the end of the recession, the largest decrease in any sector since the recovery began in July 2009. State and local governments, faced with tough choices imposed by the confluence of balanced-budget requirements, falling tax revenues, and greater demand for public services, have been forced to lay off teachers, police officers, and other workers.

[..]In raw numbers, the largest cuts were to teachers, but of these occupations, the largest percentage decline was among emergency responders.

Transcripts below the fold:

STEPHANOPOULOS And, Paul Krugman, I want to come to you with this. We saw the Dow hit 14,000...

KRUGMAN: Right.

STEPHANOPOULOS: ... on Friday, capping just a torrid January, five straight weeks of gains. This comes on top of some encouraging news on jobs...

KRUGMAN: Right.

STEPHANOPOULOS: ... some encouraging news on housing and manufacturing, and I was struck by a line in the Washington Post that said the biggest threat now to the recovery may be Washington, D.C.

KRUGMAN: Well, that's been true all along. I mean, what we've actually been seeing is -- let's put it this way. We've seen falling government spending, particularly spending -- purchases of goods and services, actually government buying stuff, an unprecedented decline in that. And that's the biggest threat to the recovery.

STEPHANOPOULOS: And cause GDP slippage in the fourth quarter.

KRUGMAN: That's right, the GDP slippage in the fourth quarter was partly just statistical illusion, but partly defense spending, which for some reason had a big negative blip. But, you know, I've actually been doing some numbers on this. If spending had grown in this business cycle the way it did in the last one, under Bush, or under Reagan, we would probably have an unemployment rate that was not much above 6 percent right now.

So it's this Washington craziness, the -- and, of course, the threat of the sequester that is the biggest threat. This recovery is actually -- you know, it should be much, much faster. We still have more than 3 million people who've been out of work for more than a year. That's terrible. But we are, in fact, gaining momentum. Housing is recovering. The labor market is slowly recovering. Yeah, Washington may mess it up.

STEPHANOPOULOS: Do you agree?

FIORINA: I think it's important to remember when we talk about the economy that a private-sector job and a public-sector job are not the same things. They're not equivalent. I'm not saying public-sector jobs aren't important, but a private sector job pays for itself. A private-sector job creates other jobs. A public-sector job is paid for by taxpayers.

The government does not spend and invest money as efficiently as the private sector. There's all kinds of data to support that. So it isn't simply a matter of saying, well, whatever job is created out there, if it's a bureaucrat in Washington, D.C., or a small-business owner hiring another employer, those are not equivalent thing.

(CROSSTALK)

KRUGMAN: ... when you say public-sector jobs, it is not a bureaucrat in Washington, D.C.

FIORINA: Oh, it is, actually.

KRUGMAN: When we talk about public-sector jobs, we look at the public-sector jobs that have been lost in large numbers in this, it's basically school teachers. Don't think about bureaucrats. It's school teachers. What we've laid off is hundreds of thousands of school teachers.

And we talk about the cuts in public spending that have happened, they are not, you know, some god-awful who-knows-what. It's actually public investment. It's largely fixing potholes and repairing bridges. So, you know, you have this image of these wasteful bureaucrats doing god knows what. What we've actually seen is an incredible drought of basic infrastructure...

FIORINA: And it is a fact...

KRUGMAN: ... and -- and laying off hundreds of thousands of school teachers.

FIORINA: It is a fact that virtually every department in every organization in Washington, D.C., has seen its budget increase for the last 40 years. That money is being paid to hire people. The number of people who are -- of course there are some teachers...

KRUGMAN: Almost -- almost no...

FIORINA: Of course there are some police officers. I'm not saying that.

KRUGMAN: ... the vast bulk of -- the vast bulk of public-sector employees are at the state and local level. They are largely school teachers, plus police officers, plus firefighters.

(CROSSTALK)

KRUGMAN: And your notion that it's all these bureaucrats, that's a myth that is used to...

(CROSSTALK)

FIORINA: It's a fact. It's not a myth. It's a fact.

(CROSSTALK)

STEPHANOPOULOS: ... clearly going to happen on March 1st now is this sequester.

FIORINA: It's not a myth. It's a fact. We don't have enough private-sector job creation.

STEPHANOPOULOS: We heard from Harry Reid that he's hoping the sequester doesn't kick in, but, Congressman, I've noticed some top Republican leaders seem to be accepting the fact that we're going to have these across-the-board budget cuts on March 1st. Talking to White House officials, you get the sense that they are prepared to go through with it, as well, and that could be a big hit on the economy.

BARLETTA: I do believe that my sense is the sequester is going to go through. It was put in place to -- so we didn't get to this point, but it is, it's a law, and I believe we understand, it's not what we want on our side. I know the defense cuts are very hard for many of us to swallow. But at the end of the day, Washington needs to do something about its spending. We are spiraling out of control. This country can't survive. We can't sustain the spending that's going on.

STEPHANOPOULOS: Matthew, what's your sense of what the public reaction is going to be? Because it does appear that the sequester is going to hit for at least a period of time, these across-the-board budget cuts, maybe even a government shutdown the end of March.

DOWD: Well, I think the fundamental problem, I think, that exists today is long before all this is -- the public looks at Washington as completely out of sync with where they are in their life. They think Washington's totally dysfunctional. They don't trust anything that comes out of Washington.

Wherever they -- whether they're progressive or whether they're conservative, they do not trust Washington. And until that trust is rebuilt, part of it has to do with the fiscal mess, part of it has to do with the lack of leadership, but as they watch Washington, day in and day out, you look at the number of trust in Washington. FDR understood this. If you go back and look at FDR and you look at John F. Kennedy and all the folks -- John F. Kennedy, all the folks that basically said we want government to be even more involved, they understood that the people have to trust government before you get government more involved. And that's a huge part of the problem.

(CROSSTALK)

RAMOS: ... might lead to -- to another recession. I don't know. You know much more about that, but that's a problem.

KRUGMAN: There is an important thing to say here, though, that the sequester is not nearly as scary as the debt ceiling debate was.

FIORINA: Clearly.

KRUGMAN: If we fail to make payments on debt, even for a day, nobody knew what would happen. We thought the whole world financial system might collapse. If we go a month into the sequester, it's not a big deal. It's going to be painful; it's going to be a big debate; it'll slow growth in that quarter. But this is something where actually -- my understanding is the White House thinks that this -- they will win this, that if it happens, that, you know, everybody will look bad, but the Republicans will look worse, and in the end, they will fold.

About Nicole Belle

Nicole Belle's picture
Mom, Wife, Media Critic/Political Analyst, Blogger, Austen Fanatic, Unapologetic Liberal NicoleBelle@crooksandliars.com

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