Flooding The Market

Last week I said that the current budget debate comes down to two competing messages:

The Republicans need to convince the people that the way boost the economy and create jobs is to eliminate the deficit. The Democrats need to convince people that the way to eliminate the deficit is to create jobs and boost the economy.

It looks like the Republicans have an even more interesting message than I thought. Here’s the standard boilerplate, from Boehner’s office announcing a new paper they say validates their economic strategy:


 “JEC’s study provides the facts to back up what the American people know: Washington Democrats’ spending binge has made it harder to create jobs, and cutting spending will reduce uncertainty and encourage the private sector to make investments that will grow our economy,”

Unfortunately, that also sounds like the Democrats who are always going on about how they have to prove to the markets that they are serious by cutting "entitlements". But the Republican message is far crisper and easier to understand than the Democrats who argue for simultaneous cuts and increases in spending. The Dems need to take a different stand.

This should help:

 The paper makes the party’s anti-Keynesian case that fiscal consolidation (read: spending cuts) can spur immediate economic growth and reduce unemployment. But in making that case, the Republicans may also have given Democrats some political ammunition.

 For example, the paper predicts that cutting the number of public employees would send highly skilled workers job hunting in the private sector, which in turn would lead to lower labor costs and increased employment. But “lowering labor costs” is economist-speak for lowering wages — does the GOP want to be in the position of advocating for lower wages for voters who work in the private sector?

Personally, I think it goes without saying that they want to lower wages and I don’t know why the Democrats haven’t been pounding them for it relentlessly already. I am, however, surprised that they’d openly attach themselves to it.

Update: Looks like Rick Perry’s got Texas out in front on this:

 When Texas Gov. Rick Perry (R) gave his annual state address, he promised that his plan to fill the Lone Star state’s $27 billion budget gap without raising any new revenue would lead to economic prosperity and job growth. “Balancing our budget without raising taxes will keep us moving forward out of these tough economic times, creating more jobs and opportunity and leaving Texas more competitive than ever,” he said. “As other states flounder about, oppressing their citizens with more taxes and driving away jobs with bad policy, Texas will make the right decisions, and emerge stronger.”

However, the bipartisan Legislative Budget Board found that the budget before the legislature could cause the state to lose 600,000 jobs, including more than 260,000 in the private sector:

 Texas could see more than 600,000 jobs disappear if lawmakers adopt the $83.8 billion budget that will go before the state House late next week, according to a state agency. Harsh spending cuts in the budget could cost more than 263,500 private sector jobs and 343,000 government positions over the next two years, according to estimates released Wednesday by the Legislative Budget Board, a bipartisan committee.

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