I want spending, I want spending, I WANT SPENDING!
By: Daniel Becker
There is some new information from Adam Hersh of Center for American Progress showing what has happened in the states that have followed the conservative economic approach (yes, talking to you Obama, DLC, Clintonites). Keep cutting at your own risk.
Here’s the thing. Like the Wile E Coyote, we seem to have run off the cliff. Our feet are still moving like we are running because we have not noticed we are off the cliff. Or I should say those in the lofty parts of our power house and economy have not noticed. Now, in cartoons, sometimes the charater makes the realization and can scramble back to safety at the edge of the cliff. However, Wile E never did get it and always fell.
I’m not interested in being taken down by Senator, Represenative, President, Chairman Wile E Coyote. No thank you. I know we’re off the cliff as do the vast majority of not only the USA but it seems the rest of the 1st world nations. So listen up Wile E. We’re not following you any more ( I hear you Greek patrons). Not going to try to catch that road runner your way anymore. And here is why:
Relative to national economic trends, states that increased spending enjoyed on average:
0.2 percentage point decrease in the unemployment rate
1.4 percent increase in private employment
0.5 percent real economic growth since the start of the recession.
In contrast, states that cut spending saw on average:
1 percentage point increase in the unemployment rate
2.1 percent loss of private employment
2.9 percent real economic contraction relative to the national economic trend.
So, I hope the IMF is happy now. I have to be honest, the study does note:
The three figures presented in the accompanying charts demonstrate that steep state government spending cuts have gone hand-in-hand with rising unemployment, falling private-sector payroll employment, and lower real growth in states’ gross domestic product, or GDP—the sum of all goods and services produced by labor and equipment in each state, minus imports. The analysis, however, does not tell us whether the spending cuts caused the negative economic outcomes. But in all three cases, steep spending cuts are statistically associated with markedly worse economic performance.
There are some nice charts at the linked article if you are more visual. Personally, I feel this new info just further supports my position that people are not drowning (debt is not money and thus not water), they are dehydrating. We need more of the water that already exists. It’s the income inequality issue. I am rather certain that more government cutting has no chance, zero chance of reversing the inequality.
If we can’t reverse the inequality, then we’re going to continue with what I pointed out in 2008. That is, the top is taking money from the economy as income faster than the economy can produce it. Can you keep spending more than you make? No, is the conservative answer. Well, can you keep taking it faster than you can produce it? No, is the liberal/progressive answer.
The issue is not that we are spending too much via government because the government is not just another player in the economy. As I have noted, as long as the government acts counter to the players in the economy and does so in a manor that assures equality and the reduction of risk in living, it is not a competitor. It does not “crowd out” the private sector.
This leaves the real issue of a stalling economy, and declining living security one of to much money being taken out of the economy. For decades as noted, one group has been taking too much money out of the economy and have been doing it at ever increasing rates: the top 1%. They are doing it faster than the economy can produce it. This, as far as I am concerned is no different than government cutting spending. Either way, money is taken out. Velocity is what we are talking; how much and how fast money is moving through the economy. Of course to understand such, one has to appreciate that Wall Street, banks, and markets are not an economy. This is why the government, acting to fulfill it’s prime purpose of equality of power is never a competitior in the economy.
So, how convienent the conservative issue is debt. Too much of it they say. Too much spending. HA! The real debt is in the lack of income to everyone other than those in the top 1%. They took and are taking so much money out of the system in the form of income (decrease union membership, tax cuts, off shoring, financialization, consolidation) that they have damaged the machine which allowed them to have growing income. This is the real debt. It is the lack of economic growth. And the rich have caused it. Yet there solution is to cut government spending and further reduce the amount of money in the active (remember velocity) part of the economy all the while taking even more out as income in their pockets?
Do you see how nuts Wile E Coyote is?
DoLB wants us to believe that reduced spending caused reduced GDP, employment, etc. His article says: “The analysis, however, does not tell us whether the spending cuts caused the negative economic outcomes. But in all three cases, steep spending cuts are statistically associated with markedly worse economic performance.”
Highligting the final sentence above, but ignoring the immediately prior sentence “The analysis, however, does not tell us whether the spending cuts caused the negative economic outcomes.” makes me wonder what he wishes done? More spending from thin air?
Pointing out that state and local spending most often require balanced budgets. It is, therfore, pretty obvious that reduced spending was a direct result of reduced GDP, Employment etc. Effect not cause!
BTW, where are they supposed to get those added funds to spend?
I did not ignor the prior sentence which is why it is in italics. Yes, can say cause, but as the bold notes can say cuts and bad results go together.
Yes, reduced gdp hurt the states cause they need a balanced budget. However, you want to fix this, then think, as this posting is, national. Then the states can balance their budget.
“BTW, where are they supposed to get those added funds to spend?” Why CoRev, you know the answer to that: TAX! Or you can try a version of trickle down by printing money and then spending it locally through as many hands as is possible vs as few hands as possible.
So the author wants the nation to act more like North Dakota and less like California/Florida/Nevada…
I wonder whether the author made his conclusion before or after he ran the numbers. Taking the delta of unemployment since December 2007 vs the national average is not a statistic to view the relationship between a state’s spending and unemployment (the employment situation in Utah and South Carolina are not close to being equal). That said, Alaska looks pretty outstanding in this view.
Should be “can’t” say caused.
Maybe Daniel should not have started his post with the issue of government spending given that the real issue he is trying to bring forward is a distortion in the income distribution. Read his last paragraph.
“So, how convenient the conservative issue is debt. Too much of it they say. Too much spending. HA! The real debt is in the lack of income to everyone other than those in the top 1%. They took and are taking so much money out of the system in the form of income (decrease union membership, tax cuts, off shoring, financialization, consolidation) that they have damaged the machine which allowed them to have growing income. This is the real debt. It is the lack of economic growth. And the rich have caused it. Yet there solution is to cut government spending and further reduce the amount of money in the active (remember velocity) part of the economy all the while taking even more out as income in their pockets?”
Daniel, go directly to the primary point you’re trying to make. Trying to communicate an idea with an analogy only deflects attention from the crux of the main idea. Yes, there is too much income going out of the economy to too few earners, and they are not putting that income back into the economy in sufficient amount. The rich have never been interested in job creation or income equality. They are only interested in their own wealth and it has become a great burden to the economy to provide them with that gross share of the wealth. It needs to be recycled and that will only happen through adequate taxation which will have the added benefit of reducing the deficit. Don’t confuse the narrow minded through the use of obscure analogy. Go to the point. Too much income is going to too few hands and too little wealth is reentering the economy as a result.
DoLB, now I am totally confused on what you meant re: cause and effect. Do you believe reduced state spending caused .., and do you believe that reduced state spending caused the recession?
If you believe the recession caused reduced state spending, then how do you propose to take even more out of the private sector to improve sustained growth? That’s the only growth that really matters, unless your just playing GDP numbers games.
How many flowers does the government buy from you, as opposed to companies and private individuals? In whose hands would you rather have the money?
“If you believe the recession caused reduced state spending, then how do you propose to take even more out of the private sector to improve sustained growth?”
It depends on who you take it from. If you take it from those who have no need of it and who are refusing to invest it and you inject it into the economy in a way that improves infrastructure, research, and development (real investing), then “the economy” benefits and the horders of money and titles lose some of their power.
I don’t sell flowers. But at present the holders of money are loath to do anything with it other than sit on it as the recession returns and prices fall. Each day their real power grows as the Gawd Almighty Dollar comands more and more labor and more and more natural and produced resources. In the current situation I would rather a REPRESENTATIVE government had the purchasing power as opposed to the idle rich.
DoLB, here’s some interesting fall out that disproves your contention. Rmember that ole Wisconsin issue re: unions and spending? C’mon now Y’all remember it!
Well here’s the newest budgetary fallout.
“Cost savings from worker contributions to health care and retirement, taking effect today as part of the new collective bargaining laws, will swing the Kaukauna School District from a $400,000 budget deficit to an estimated $1.5 million surplus, the Post-Crescent in Appleton reports. The district tells the Post-Crescent that it plans to hire teachers and reduce class size.” (My bolding) From here: http://www.jsonline.com/blogs/news/124727554.html
There’s spending and then there’s good spending resulting in even more jobs. Uh oh, new jobs are from conservative ideas to balance the budget.
Both you and sammy are leagues off the mark. Sammy because he thinks that a small number of very wealthy can spend in a manner that helps the average small retailer, and their suppliers. That’s trickle down bull shit to the nth power. More average earners earning a little better income would be a significant improvement for businesses like Daniel’s.
You appear not to have noticed that the high end of the sales market is rolling along nicely. High prced cars are flowing across the roads of Gold Coast, USA. High priced RE is still a better play than is a 60′ x 100′ plot in Tallahassee, Boston, or where ever. My eyes almost pop out at the size of the McMansions I see going up all around what were slightly upper middle areas of NY and are now becoming upper-upper and still upper. I haven’t noticed any declination in Manhattan rentals or condo prices. I read the RE section routinely. I sell cars few of us can afford. Put your finger on the pulse of the wealthy and you will find that there is little stress. The rich are still rich, very rich, and maybe getting richer.
CoRev–What do you bet that that surplus in the Kaukana School Dist. was caused by firing teachers? So, does it matter the school district has a surplus if it’s not spending its revenue to educate the kids??!! A school is not designed to make a profit and distribute dividends. Think, kiddo! NancyO
NanO, your comment appears to show a modicum of desperation to show an alternative explanation for the school district’s savings. If you want to consider teacher salaries as causative, I would think instead of firing, it c/would be more likely retirements. It is not unknown to see those eligible to retire to do so when faced with a loss of income due to changes as happened in WI.
Poor people buy food, cable TV, and things from Wal-Mart. Rich people buy cars, boats, vacations, art, professional services, restaurant meals, and, yes, flowers. Rich people also invest, poor people don’t.
Gee Sammy, guess you have not read the latest regarding the concerns of the cable companies: Poor people not being able to afford their products.
At the conference, cable and media executives agreed the pay-TV subscriber losses in the second and third quarters of 2010 were driven by weakness in the economy rather than a technological phenomenon. That raises the question of whether another downturn in the economy–or a prolonged slump–could cause more unexpected problems for cable companies.
“Costs have increased for people while disposal income has stayed flat or declined,” said Patrick Esser, president of Cox Communications Inc. “That’s a problem.”