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Thursday, November 17, 2011

Contractionary Fiscal Policy is Contractionary

Robert Kuttner is unhappy with the Washington Post:

Post Hoc Fallacy, by Robert Kuttner, Prospect: Wednesday’s Washington Post deserves some kind of perverse award for advocacy journalism—in this case, for advocating the proposition that dire economic consequences will ensue if the congressional Super Committee fails to cut a deal for drastic deficit reduction. This is, of course, one side of an argument.
Those on the other side, including myself, have argued that austerity in a deep recession makes no economic sense...
Moreover, Social Security does not belong in this conversation, and Democrats are better off, substantively and politically, defending it against Republican proposed cuts rather than lumping it in with budget talks....
The Post has been an editorial champion of the Super Committee and austerity politics, and of the bogus claim that Social Security is partly responsible for the current deficit...
A companion piece, by Ann Kornblut, was headlined, “White House Girds for Failure.” ... OMB Director Jack Lew is quoted, “I think it’s important that they succeed.” Again, the subtext of the piece is that the economy really needs this deal.
But the absolute corker is a companion piece by Neil Irwin and Ylan Q. Mui, with the economically absurd headline and premise, “Supercommittee could add uncertainty to holiday shopping.”
The writers quote leaders of trade associations saying that the committee needs to act to restore confidence. This is Paul Krugman’s famous "confidence fairy." ...
So let’s get this straight. If the committee does agree to cut the budget by some $1.2 trillion, including people’s Medicare, Medicaid, and Social Security, that will make them more likely to go out and shop. But if the committee fails to extract cuts—putting off budget austerity until 2013—that will make people more hesitant to spend? Where do these people study their economics? ...

The Super-Duper Job Creation Committee is, of course, nowhere to be found.

    Posted by on Thursday, November 17, 2011 at 09:09 AM in Budget Deficit, Economics, Social Security | Permalink  Comments (12)


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