Obama Brags About Falling Deficit as Jobs Disappear and Public Investment Falls to Post-WWII Low

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President Obama brags that the deficit is falling at the fastest rate in 60 years. It’s true, and it’s terrible news for the economy. As economist Dean Baker (who was a guest on Moyers & Company last weekput it, “celebrating the sharp drop in the deficit… is a bit like celebrating a sunny day in a region suffering from drought.”

A simple truth — one based on math rather than ideology — is that in an economy like ours, which is slowed by sluggish private-sector demand for goods and services, every dollar of federal deficit spending either puts a dollar more in our pockets, or results in a dollar less in debt owed by American families and businesses. That’s because it’s offset by either a dollar less in public spending in the economy or a dollar more that we pay in taxes.

So while the deficit is indeed shrinking fast, the CBO estimates that the austerity package known as “the sequester” will cost the American economy 1.6 million jobs through the end of next year.

While many conservatives rail about “out of control public spending,” the reality is that federal spending, as a share of the economy, has dropped in each of Obama’s five budgetary years (XL).

Now, according to an analysis by The Financial Times, US public investment has fallen to a post-World War II low, and the cause is entirely partisan

Public investment in the US has hit its lowest level since demobilisation after the second world war because of Republican success in stymieing President Barack Obama’s push for more spending on infrastructure, science and education.

Gross capital investment by the public sector has dropped to just 3.6 per cent of US output compared with a postwar average of 5 per cent, according to figures compiled by the Financial Times, as austerity bites in the world’s largest economy.

Republicans in the House of Representatives have managed to shrink the US state with their constant demands for spending cuts, even though their uncompromising tactics have exacted a political price, with their approval ratings in Congress at record lows…

The figures underline how across-the-board budget cuts are threatening future growth, as the axe falls heavily on federal investments that boost output, rather than transfers such as pensions and healthcare for the elderly.

The jobs we’re hemorrhaging due to spending cuts aren’t the whole story. According to a study by the conservative Peter G. Peterson Foundation, uncertainty resulting from lurching from one contrived fiscal “crisis” to another has cost the economy another 900,000 jobs since the tea partiers came roaring into Congress in 2010.

That year, Republican leaders promised that they’d have a singular, laser-like focus on jobs. It was true, but they failed to mention that they meant they’d focus on destroying as many of them as possible. And because many Americans believe that deficits are a proxy for a “bad economy,” they likely won’t pay a price for it at the polls.
 

Joshua Holland was a senior digital producer for BillMoyers.com and now writes for The Nation. He’s the author of The Fifteen Biggest Lies About the Economy (and Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs and Corporate America) (Wiley: 2010), and host of Politics and Reality Radio. Follow him on Twitter.
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