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-   -   Economics The austerity policies of the past two years is threatening a double-dip recession. (http://www.chiefsplanet.com/BB/showthread.php?t=270014)

Direckshun 02-14-2013 08:14 AM

The austerity policies of the past two years is threatening a double-dip recession.
 
It's time for some of those among us to come to two uncomfortable truths on this forum.

1. The Obama administration has overseen the sharpest decline in deficit spending just about every single one of us have seen in our lives, thanks in part to austerity demanded by Tea Party Republicans.

2. This radical reduction in the deficit is risking to stop our recovery growth dead in its tracks.

I've made this point over and over and over and over on this forum: deficit reduction retards growth.

So when you slash into the deficit as severely as we have, you will slow growth with the same severity. And what do you know? We ended up with negative growth in 2012's fourth quarter. Two quarters in a row, of course, is the legal definition of a recession (assuming the original assessment of 2012's 4th quarter holds where it is).

We've learned nothing from Europe, which has seen huge unemployment numbers, languishing recoveries, and double- and triple-dip recessions because they embraced austerity during a financial crisis while we embraced (albeit limited) stimulus.

In comes the Tea Party, and by the conclusion of the past Congressional cycle of radical austerity policy, we're now on the verge of a double-dip recession.

This is not random, folks. This is happening for that specific reason.

http://news.investors.com/blogs-capi...icit-hawks.htm

The Deficit Chart That Should Embarrass Budget Hawks
By Jed Graham
Posted 02/12/2013 08:05 AM ET

http://www.investors.com/image/Web-c...12_345.gif.cms

Here's a pretty important fact that virtually everyone in Washington seems oblivious to: The federal deficit has never fallen as fast as it's falling now without a coincident recession.

To be specific, CBO expects the deficit to shrink from 8.7% of GDP in fiscal 2011 to 5.3% in fiscal 2013 if the sequester takes effect and to 5.5% if it doesn't. Either way, the two-year deficit reduction — equal to 3.4% of the economy if automatic budget cuts are triggered and 3.2% if not — would stand far above any other fiscal tightening since World War II.

Until the aftermath of the Great Recession, there were only three such periods in which the deficit shrank by a cumulative 2% of GDP or more. The 1960-61 and 1969-70 episodes both helped bring about a recession.

Far steeper deficit cuts during the demobilization from World War II and in 1937-38 both precipitated economic reversals.

Now the deficit is shrinking about 50% faster than it did during the booming late 1990s, when the jobless rate was falling south of 5% and tax revenues were soaring — without tax hikes.

That's not to say that a recession is in the cards now, as the Federal Reserve applies its might to keep housing on a recovery path and helps propel the stock market higher. But growth is likely to be disappointingly weak yet again.

The Congressional Budget Office projects just 100,000 jobs will be added per month this year, the jobless rate will remain stuck around 8% and the economy will grow 1.4% if the sequester takes effect, but that may be too optimistic.

There was certainly no good economic reason for policymakers to risk the hit to growth that came with the roughly $200 billion fiscal cliff tax hike. Now they risk compounding the fiscal drag with poorly targeted budget cuts.

History suggests that there's little good to be gotten from cutting the deficit much faster than 1% of GDP per year. That's especially true at the moment, given the nature of our related demographic and budget challenges.

Both of those challenges suggest that growth should be our paramount concern, far ahead of near-term deficit reduction, even as we work to improve the intermediate-term budget outlook.

As far as the budget goes, it makes no sense that Congress remains focused on cutting discretionary spending. The danger clearly comes from entitlement programs, particularly health care, and the prospect that interest on the debt will spiral if we don't better align spending promises with revenues. These are programs that need to be reformed gradually and with great care, but there's no good reason to delay.

As for demographics, this was supposed to be the decade in which the leading edge of the Baby Boom generation began to ease out of the workforce and pass the baton to the next generations. Instead, there are not enough jobs to go around to allow for a seamless transition and Baby Boomers are hanging on longer as they try to recover from the financial damage inflicted by the housing bust.

There has been plenty of economic pain to go around, but younger workers have borne the brunt of three crises — jobs, housing and student loans. Since January 2000, the number of full-time jobs is up 10.5 million among workers 55 and up but down close to 8 million among the under-55 population.

In the speeches of Washington politicians, deficit reduction is all about being fair to the young and not leaving the next generation with ungainly debts. That might be true if deficit reduction came through smart changes to entitlement programs, but that's not the case.

In effect, the overly rapid fiscal retrenchment is giving younger workers a deal that none of them should want: We'll slash the deficit now, so that you will have a harder time getting good jobs and paying back your personal debts. We'll cut critical government spending on education, infrastructure and science so that new college graduates for whom job prospects remain discouraging can put their futures on hold for a little longer.

HonestChieffan 02-14-2013 08:19 AM

Austerity. OK. I'm there.

blaise 02-14-2013 08:32 AM

What we need is a 4 trillion dollar stimulus package so Obama can crow about his job creation.

FD 02-14-2013 10:41 AM

You are correct. Here is a chart comparing the fiscal policy in the current recession to past recessions. We have been living in the age of austerity for years now and it is seriously holding the economy back.

https://pbs.twimg.com/media/BC7XLC5CMAAo993.png:large

BigRedChief 02-14-2013 10:46 AM

Quote:

Originally Posted by blaise (Post 9402055)
What we need is a 4 trillion dollar stimulus package so Obama can crow about his job creation.

Ask England in the middle of its 3rd dip recession if austerity id the solution. Wonder id they regret that path? ohhhh they have polls.

Labor has a 12 point lead, the biggest lead in over 10 years. The people are pissed.
http://www.guardian.co.uk/politics/2...-12-point-poll

mlyonsd 02-14-2013 11:11 AM

Quote:

Originally Posted by BigRedChief (Post 9402422)
Ask England in the middle of its 3rd dip recession if austerity id the solution. Wonder id they regret that path? ohhhh they have polls.

Labor has a 12 point lead, the biggest lead in over 10 years. The people are pissed.
http://www.guardian.co.uk/politics/2...-12-point-poll

Get your facts straight. The UK is not in a triple dip recession.

go bowe 02-14-2013 11:25 AM

Quote:

Originally Posted by mlyonsd (Post 9402484)
Get your facts straight. The UK is not in a triple dip recession.

is it in a banana split?

Direckshun 02-14-2013 11:57 AM

Quote:

Originally Posted by mlyonsd (Post 9402484)
Get your facts straight. The UK is not in a triple dip recession.

They're missing it by a hair.

Doesn't really deflate BRC's argument, now does it.

mlyonsd 02-14-2013 12:03 PM

Quote:

Originally Posted by Direckshun (Post 9402645)
They're missing it by a hair.

Doesn't really deflate BRC's argument, now does it.

Sure it does. Evidently you can impose austerity measures and still realize growth.

Direckshun 02-14-2013 12:07 PM

Quote:

Originally Posted by mlyonsd (Post 9402670)
Sure it does. Evidently you can impose austerity measures and still realize growth.

LMAO

"Trust us here guys!

It'll take us two consecutive recessions, but we'll beat off the third by a hair!"

What a ringing endorsement of austerity.

donkhater 02-14-2013 01:35 PM

Austerity measures would work if the U.S markets more closely resembled a free market economy. Because corporations and government are tied at the hip these days, reductions in federal money (i.e. freebies) will hurt their bottom line and slow the economy. Maybe this is what it takes to wake people up to the real problem--the all too close relationship the private sector has with the federal government. By definition we are a facist economy. Austerity will hurt it, but that doesn't mean it's bad.

BigRedChief 02-14-2013 01:40 PM

Quote:

Originally Posted by mlyonsd (Post 9402670)
Sure it does. Evidently you can impose austerity measures and still realize growth.

WTF? England had a double dip recession, maybe still have another 3rd dip recession.

Obama's policies got us out of the recession with any dips but the England way is better? In what reality?

mlyonsd 02-14-2013 01:57 PM

Quote:

Originally Posted by BigRedChief (Post 9402926)
WTF? England had a double dip recession, maybe still have another 3rd dip recession.

Obama's policies got us out of the recession with any dips but the England way is better? In what reality?

Oh, it's "maybe" now?

And stop with the Obama policies got us out of the recession bull shit. The recession ended before he blew $800 billion in stimulus.

KC Dan 02-14-2013 01:58 PM

Quote:

Originally Posted by mlyonsd (Post 9402962)
Oh, it's "maybe" now?

And stop with the Obama policies got us out of the recession bull shit. The recession ended before he blew $800 billion in stimulus.

And, he's 45 days from being in another recession. Wonder how he'll spin that on Bush if it comes to pass

Prison Bitch 02-14-2013 02:16 PM

Quote:

Originally Posted by Direckshun (Post 9402035)
I've made this point over and over and over and over on this forum: deficit reduction retards growth.

.


This board is the perfect place for retards.


Of course, your argument (that you've used over and over and over) is so simple to destroy, a child could rebut it. If deficits don't matter, why not just issue 545 Trillion Bazillion tomorrow? We'll grow like crazy. Unless you really do believe there's a limit to debt. If you do, then you're defeating your own point.


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