New Economic Perspectives has the article Loathsome Wall Street Deficit Hysterics: ‘Blame the Old and Sick, Not Us’ – Part 1.
So-called deficit spending, a not very descriptive term which I have called the “net contribution” of government to growth, is not a “Left-Right” issue if both Left and Right are agreeing to, in their own ways, continue to endorse or support a growing capitalist economy (or a monetary economy of some other description that encourages private savings). Contrary to popular and political wisdom of the moment, balancing a national government budget or targeting budget surpluses are not “good” and deficit spending is not “bad”. In fact, the reverse is true: for most nations under most circumstances, national government budget balancing or budget surpluses are literally toxic for the economy while deficit spending is under many circumstances “good” for the economy. The conventional wisdom that issues from various neoclassically trained pundits of the Right or much of what passes for a “Left” nowadays, has, what is supposed to be sound, fiscal advice for monetarily sovereign governments, entirely inverted. If capitalist economies are to grow, governments are literally compelled to spend on deficit to provide enough liquidity for the economy as well as provide the public services that benefit a complex economy and civilization; political and economic predators have exploited the link to bond sales and increasing “debt” repayment obligations to muddy the political and financial waters.
The article points to an interesting graph.
The above chart is what Janet Yellen was talking about when she mentioned fiscal drag as noted in my previous post Janet Yellen On Problems of Fiscal Drag. If you read this properly, it explains why this recovery is not as strong as previous recoveries. Previous recoveries did not suffer fiscal drag from Government policy 2 and 3 years after the start of recovery. This recovery is the one suffering from the drag. All the talk in Washington from both sides of the aisle seems to be about putting a little more drag on the economy, just when the above chart shows that what they are recommending is exactly the cause of the problem.
Maybe some in Washington can do the math, but they don’t seem able to read the graph.
For those who do not have magnifying glasses, the small print under the chart translates to “In the chart, the column for average recovery from postwar recessions excludes data that may contradict this thesis.” Or at least that is the way I translate it. Well, you can’t always believe everything, or is that can’t ever believe anything. Maybe we can believe the other two columns to the left of this one.
I am using a cheap shot to overplay the footnote to beat others to the punch. In fact, if you want to compare the average of other other recessions to this one, then you do need to exclude this one from the average. That takes care of the first part of the note. The proviso for data limitations seems to only apply to the exclusion of the 1948-49 recession. So, out of the goodness of our heart, we can accept the exclusion of that data. You also don’t want to include data from before the war, because the depression of the 1930’s is where we learned how not to ever make those mistakes again. Well, the “not ever” part apparently didn’t last to 2009.