A new report came out today, stating that unemployment would be nearly a full point lower, and economic growth would be a good two points higher, if not for all the government spending cuts since 2011.
"Hey," whispered Obama to Boehner, in my imagination, "I was right." PHOTO: Reuters
In the battle over whether cutting spending is good or bad for economic growth, score one point for "bad." A new report came out today, stating that unemployment would be nearly a full point lower--somewhere in the neighborhood of 6.5%--and that economic growth would be a good two points higher, if not for all the government spending cuts since 2011. I haven't seen too many Congressional Democrats trumpeting this finding, which comes from the combined work of government and private economists, but they ought to. Since President Obama took office (and not so much before that) Republicans have been screaming from the mountain tops that we need to cut spending to create jobs.
That argument rests on the premise that whatever the government does spend, the private sector will spend instead, and that private sector spending is always better than public sector spending. Both claims are pretty clearly false, but there are times when government needs to ease off the gas pedal and let the private sector do its thing. That leaves the question: was the post-recession era that began around the same time as Obama's presidency one of those times?
The latest finding shows that the private sector did not replace government spending with more, or even the same amount of job-creating spending. Which makes sense. The government, wasteful as it can be, tends to focus on employing people for tasks that increase the public good. Reduce the money doing that and add it to the bank accounts of Americans, and some of it will move around and create jobs, and other parts will sit in those bank accounts.
Obviously there's plenty more to this story, and much more to debate, so let's just leave it at this. For those who want to make the case that the government should spend less to create jobs, your case got harder to make. The case that government spending creates jobs just got some backup from apolitical numbers.