The contrast between an aggressive policy of jump-starting growth and putting Americans back to work and the old, failed trickle-down economics formula was on sharp display Thursday in a mini-debate on CNBC Thursday between Robert Kuttner of The American Prospect and Andrew Busch of BMO Capital Markets.
Both were invited to respond to the statement signed by more than 300 economists and civic leaders that warned against killing growth and jobs in the name of deficit reduction.
Kuttner warned that “unemployment is going to plateau around 10 percent indefinitely unless we get a stronger economy going,” he said. Government has to step in to spark the demand that the private sector is not creating on its own, and in a news conference earlier in the day, Kuttner pointed out that when interest rates are at historic lows, now is the best time for the government to borrow to stimulate the economic growth that will enable the government to more easily lower the deficit later. “We prefer recovery first, then you get to work on reducing the deficit,” he said.
Busch makes several errors in his rejoinder to Kuttner.
He dismisses government as a jobs creator, when in fact public investments in infrastructure, schools and other public goods are the foundation for successful private sector job creation. All we need to do is look to China, which is investing billions of dollars in its transportation infrastructure and using that investment to help its businesses to operate more cost-effectively, while U.S. businesses lose time and money attempting to move goods through outmoded roads, rails and ports. Or we can look at such countries as South Korea, where high-quality, high-performing schools are churning out the next generation of technology pioneers.
Government is certainly a jobs facilitator, and we should not allow conservatives to keep selling the idea of a disconnect between a healthy government and a healthy private sector. They go hand in hand.
He also repeats the right-wing mantra that the Obama administration spent $862 billion to no good effect. It bears repeating again and again: One-third of the Recovery Act stimulus package was tax cuts. Only two-thirds was “spending.” And that two-thirds, about $500 billion. appears inadequate because it was inadequate to cover an economic hole of up to $2 trillion. Yet, even that $500 billion was enough to keep the economy from sliding into depression.
“Why don’t we try something else?” Busch asks. The answer is, we did. Remember the Bush tax cuts? Remember the deregulation of Wall Street? The Bush tax cuts did nothing to increase the real incomes of working-class Americans in the last decade—note David Leonhardt’s recent overview of income and economic growth during the past three decades—and the right-wing deregulation binge set the stage for the subsequent economic crash on Wall Street as well as tainted food, tainted toys and environmental disasters.
The common-sense choice is what Kuttner poses, and at the end he proposes the correct question for the Obama administration: Will you go bold and support a program that first puts Americans back to work doing the work that must be done, then addresses the deficit in the context of a stronger economy?