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 is a senior digital producer for BillMoyers.com. 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 or drop him an email at hollandj [at] moyersmedia [dot] com.
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  • Anonymous

    one would think that eventually the GOP would get it thru their thick heads that “trickle down” DOES NOT WORK. The government CAN create jobs, and with our infrastructure in dire need of fixing, this is the way to make jobs. This in turn gives people money not just to spend on buying, but gives some also the money to create new businesses, which in turn creates new jobs….. duh.

  • Owen Johnson

    Trickle down works exactly as the GOPers want it to. The responsibility, blame and suffering trickle down just fine, the way the wealthy and corporations want it to. And those are the people/entities our politicians represent.

  • NotARedneck

    Trickle down only works (a little) when the wealthiest are making so much that they squander their good fortune on mindless services delivered by the rest of us. Even then, things are not that good. This soon dries up when they are no longer making money easily on speculation (as in the Bush era when something akin to theft and fraud enriched them).

    In a normally functioning economy, the wealthy have to earn their wealth by getting the rest of us to produce things. They then sell these things to the 99% who then have money in their pocket to buy them.

    Since Reagan came into office, the economic levers have been re-geared to allow the wealthy to make money almost exclusively on speculative activity – most of it fraudulently. They no longer have to actually take a risk, invest in plant, equipment, R&D, etc. In fact, the LESS of this that they do, the more that they make. This is because, collectively they have more cash chasing assets to buy. Add in tax cuts for them and things are going very well in this “new economy”.

  • Glenn Brzuziewski

    Sectoral balance analysis tells us that every dollar the government deficit spends is realized as a financial asset on the private side. This “crowding out” effect that so many like to cite is just plain wrong. Government simply needs to tax less and spend more. We are a monetary sovereign on a fiat currency since 1971, but don’t act like it.

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  • JonThomas

    Rusty, while you do make a few salient points, your comment seems to assume too much and afford too little.

    There is a huge difference between ‘trickle down’ as an economic theory, and government spending used as stimulus.

    Just one such misrepresentation is using the 2 in a contrast.

    In your last statement you contrasted one (with a claimed perception as good) against the other (with a claimed perception as ‘wrong.’)

    In this woefully designed system, where spending is a necessity, there is no true antagonistic contrast, both could be done at the same time.

    The trouble that most liberals have with the ‘trickle down’ model isn’t with seeing private sector spending as ‘bad.’ Rather, their complaint is that private sector spending takes power over society’s economic interests (basically economic health and security,) from the public hands of the Government – where citizens have a say (well in a healthy Democratic Republic anyway,) and puts economic power into the fickle hands of self-serving interests.

    The point is… Government spending, especially as a stimulus, is mainly domestic and assured. Private sector spending is not locally determinate, nor is it in any way mandated or guaranteed.

    ‘Trickle down’ is at best, a self-serving phenomenon of a ridiculously unbalanced, unsustainable system.

    Government is exactly the enterprise instituted by humankind to foster the economic security of a nation.

    When England no longer respected the economic security of the colonists, those colonists determined that they needed their own government to accomplish that very task!

    When powerful groups try to hoodwink a nation into believing that these very groups, as a private elite, have the best interests of citizens in mind, it’s time to lay bare their deception!

    ‘Trickle down’ is no more than a political tactic used as an excuse to shift government policy toward favoring economically powerful self-interests.

    Anyone who believes in in the ridiculous notion of ‘trickle down’ as an economic model, should go away and build a holographic force field in a mountain valley of Colorado.

  • JonThomas

    Rusty, are you aware that your comment offers a perfect example of circular reasoning? Further, I’m not sure what any of what you just said has to do with ‘trickle down.’

    You say that you trust ‘private citizens’ more than “what someone in government” tells you.

    You also point out, and I agree, that some politicians feel beholden to those who supported their campaigns.

    It’s interesting to me that those same people you are concerned about when they support politicians, are the same ‘private citizens whom you trust.’

    ‘Economic self-interest’ is just that… SELF-interest.

    What private enterprise accomplishes is not necessarily in anyone else’s interest but their own. As I pointed out, at least in Government the people have a say… even those ‘private citizens’ in which you ‘trust.’

    If you want to invest in private enterprise, then you are free to do so, but the Nation as a whole is not served in any way by the efforts of private interests – except where those interests coincidentally intersect.

    The issue at hand has little at all to do with anything in your comment. The issue is ‘trickle down.’

    If you want to change the subject to distract from the point that ‘trickle down’ does not serve the interests of American citizens as a whole, then please post somewhere or to someone where people fall for such diversions.

    The rest of your comment leads down abstruse back and forth arguments…. sorry, not my thing.

  • Rusty Jewell

    …”except where those interests coincidentally intersect….

    those coincidental intersections have built the greatest economic engine ever known to man.

    ding..ding..ding..ding…….we have a winner!!!

    Let me go back to something you posted in response to one of my earlier posts. You stated that I was labeling one as being good and contrasting it with the other as being bad. I never did put labels on one or the other. I was actually calling out liberals for doing that. Liberals label private sector as not working, which you have done yourself.

    “Anyone who believes in in the ridiculous notion of ‘trickle down’ as an economic model, should go away and build a holographic force field in a mountain valley of Colorado”.

    I simply posed the argument that government stimulus IS trickle down economics from the largest, wealthiest entity on the face of the earth. So if it works in one fashion, how can you argue that it doesn’t work in another fashion.

    People like to hear solutions so let me give you my solution to the situation we find ourselves in today. When the Astrodome was being proposed to be built, nothing like it had ever been built in the world. Judge Roy Hofheinz approached several companies and asked them to build it at cost because domed stadiums would be the wave of the future. Whoever built it would be the world’s leading expert on building domed stadiums and they would get all the business. They agreed to it. President Obama could approach construction companies across the country and ask them to build roads and bridges at cost but in the name of patriotism. We need to hire more people and we desperately need improved roads and bridges. So there’s your stimulus argument.

  • JonThomas

    The “greatest economic engine?” Have you walked out of your ivory tower recently?

    What has been accomplished is the greatest destruction of the Earth and it’s people ever!

    Do you even recognize the subjectivity, selfishness, and hubris of your statements?

    Ask a victimized family of the recent banking collapse what they think!

    As I said, I have no real desire to get into subjective back and forth arguments. Government does not ‘trickle down’ anything. It does not profit, nor does it spend as if it is an entity of, and / or for itself.

    Government is simply the mechanism though which citizen’s of a nation are served. It collects taxes and distributes services.