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?

Tags: , , , , Comments (15) | |