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A recent article in the New York Times and an interview with billionaire Wilbur Ross point to the fact that we cannot cut our way out of this economic crisis that began in earnest before the 2008 presidential election.
The Times article is titled: "GOP on Defensive as Analysts Question Party's Fiscal Policy." Among the analysts mentioned are Reagan adviser Martin Feldstein, and Henry Paulson, Treasury Secretary under George W Bush.
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The article says that even before the deficit reduction plan was signed into law:
macroeconomists and private sector forecasters were warning that the direction in which the new House Republican majority had pushed the White House and Congress this year - for immediate spending cuts, no further stimulus measures and no tax increases, ever - was the wrong one for addressing the nation's two main ills, a weak economy now and projections of unsustainably high federal debt in coming years.
Instead of listening to the experts, Eric Cantor dug his heels in harder, and in a memo to House Republicans said
"Over the next several months, there will be tremendous pressure on Congress to prove that S.& P.'s analysis of the inability of the political parties to bridge our differences is wrong. In short, there will be pressure to compromise on tax increases," Mr. Cantor wrote. "We were not elected to raise taxes or take more money out of the pockets of hardworking families and business people."
The downgrading of the US's credit rating by Standard and Poor, whatever one thinks of the company, is in no small part based on the assumption that the Bush tax cuts for the wealthiest will be allowed to continue beyond their 2012 expiration date.
Joel Prakken and Lawrence H Meyer of Macroeconomic Advisors refer to "job-killing spending cuts", which we are experiencing here in New Hampshire as a result of the radical Republican budget. We're up to at least 1000 lost jobs in the health care sector alone.
Bolstering the idea that cutting taxes to the wealthy and to corporations will not create jobs, billionaire investor Wilbur Ross tells NPR's Steve Inskeep that businesses have gotten used to operating with less employees and are choosing to keep capital over labor.
Number one is we believe that unemployment is going to remain high. Virtually all companies we know of have learned to live with fewer employees per incremental dollar of sales than they ever had before. So we believe that part of the high unemployment is due, not just cyclical factors, but to structural change in the economy. And that's why corporate America is in much better shape than Mr. and Mrs. America.
It astonishes me how people such as Cantor and his ilk can continue to believe cutting the public sector is the way to recovery when the proof is, it isn't. Yes, things can always be made more efficient, etc, so on and so forth, but budgets do matter, as we are beginning to see in New Hampshire, where "job killing spending cuts" have only just begun,and whose effects have not yet come home to roost, but will.
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