The economy is improving, but Congress can make things worse.
Late last week, after we'd learned the economy created nearly a quarter of a million jobs in January, President Obama delivered a not-so-subtle message to Congress: "Don't muck it up."
This was not a stray thought from the president. Economic conditions appear to be improving, but Americans have seen encouraging data before, only to have the strength of the recovery falter. The three best months for job creation since the start of the recession were February, March, and April of last year, but the trend didn't last -- the Eurozone crisis, a disaster in Japan, and Republicans' decision to play a suicidal game with the full faith and credit of the United States "mucked" things up.
As Ezra Klein noted this morning, the projections for 2012 look good, but Congress still has the capacity to do real damage to the recovery.
In a perfect world, we wouldn't just smoothly extend the payroll tax cut and the unemployment benefits, but we would begin a large program of infrastructure investment, and we would pass a deficit-reduction package that began in 2014, and the Federal Reserve would step up with a bit more support for the economy. [...]
The other option -- perhaps the more likely option -- is that Congress could imperil the recovery by failing to extend the payroll tax and the UI benefits, which could shave as much as a point off growth this year, and signaling it will fail to come to a deal on the Bush tax cuts and the sequester, which could shave even more than a point off growth next year. In that case, businesses and households would have every reason to expect the recovery is likely to sputter out again, and so they'll have every reason to refrain from hiring and investing, which will, in turn, assure the recovery sputters out again.
The worst thing that could happen at this point is for a sense of complacency to take hold. There will no doubt be many on Capitol Hill who will look at the recent progress and argue, "See? We can now start focusing on austerity measures, taking money out of the economy, undermining consumers' buying power, and weakening economic demand on purpose."
That would be a tragic mistake. Getting closer to where one wants to go is not a rationale for slamming on the brakes.
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But...isn't that what congress does best these days?
Meh I can see by the lack of response that everyone is burned out about discussions on how messed up congress is
I read this comment on another site and this pretty well sums up the problem with the right and their desire to hammer against deficit spending:
That sums it up perfectly.
If they get re-elected it will prove they are correct-America ain't worth it.
The deepest message is the wealthy in the GOP still see money in the hands of the poor, and that's just waving a red flag in front of a bull.
The wealthy are on tape saying specifically that the money must be removed from the bottom of the pyramid.
Haven't they ever seen an ad for Jenga? If you weaken the base, the top...topples.
The upper classes in the USA have been nursing a grudge for eighty years over the Roosevelt Administrations unjust enrichment of the rabble. Now is their chance to undo that, and nothing is going to stop them.
More and more it looks to me as though they're determined to undo the revolution of 1933 so that they can relive the revolution of 1793.
That's what these people do, right? Relive old battles? Play dress-up and pretend to shoot at each other? Do they hope this time the South will win?
If you're planning to re-enact history, at least pick one where you win. 1793 is not exactly the prime choice.
LOL, Thank you!
Given that republicans in Congress have a perverse incentive to foster failure over any desire for America to succeed I remain deeply uneasy about the path they will choose.
They will do everything to stop the growth. They don't care if this country is destroy. Republican are really the Fascist and turning are country into Fascism. These are some of the thing they have done to this country. Grover Norquist no taxes which is against the Constitution, Voter ID is really voter suppression, Destroy the Post Office to privatize it, Try to privatize Social Security, get rid of Medicare and Medicaid with a voucher this is the real death panel and this list could forever.
I was disappointed that President Obama didn't mention the "American Jobs Act" in his State of the Union speech. I think that it would be in both his and our best interests if he would continue to beat this drum.
That said, it's worth repeating that Republicans don't want a recovery. We all know why.
I love the way he is standing back as the nuts run the asylum. He could never destroy them as well as they are destroying themselves.
PSC --
Old military maxim: "never interrupt your enemy when he is busy making a mistake."
According to this chart from Ezra Klein, the 2011 payroll tax cut only accounted for 0.2% of the 1% growth in GDP due to personal consumption. http://wapo.st/vJuYMH
If last year’s payroll tax cut only raised GDP by 0.2% how can economists like Mark Zandi argue that extending the payroll tax holiday for 2012 (assume it will be extended the full year) will increase GDP by 1%? http://bit.ly/wetadR
Does anyone really think that the same policy will have differing effects on economic growth?
Rather than argue over the principles of economics(which ,though I am relatively unfamiliar with, seem to be far more opinion than fact in the most part) I would change the subject and ask just how much better off we would be if the Bush tax cuts had not ever been put in place.
The payroll tax cuts last year simply extended the stimulus income tax cuts by another means, and the impact of those cuts is baked in. When Zandi says that the cuts will increase GDP by 1%, that is in comparison to losing the cuts, which would drop GDP by about -0.8%.
Paul S. Campbell
Not to sound rude, but what is the point in discussing what could have been? The Bush tax cuts have already been put in place and extended three different times. If we just debate what should have been done in the past we will never move forward.
I would agree that there are more theories than fact regarding economics. But, that doesn’t mean that one should ignore the general consensus of many economists. And the general consensus from tax policy experts like Len Burman, Howard Gleckman, and Bruce Bartlett is that that the payroll tax cut is better than doing nothing but it is definitely not the best option to stimulate spending.
http://bit.ly/qsFK2y
http://bit.ly/uvIDMJ
http://nyti.ms/qu39cL
WNG,
I am having a trouble understanding you first point.
First, which income tax cuts are you referring to?
Second, what do you mean by "the impact of those cuts is baked in"? Baked into what?
Not to be rude? By all means be rude if you want. You see I admit to not being an economist I also admit that the past is the past but when it comes to laws the past can be undone. Laws can be repealed. To gain favor in repealing bad laws a case should be made as to why they are bad. Thus the question is not meant as an if only type of wondering but more of a reason to rethink.
Paul,
Thank you for clearing up your point.
The Bush Tax Cuts are a very divisive issue. On the one hand, they have not worked as well as intended and have driven up the debt in response. However, to repeal them now and raise tax rates on every taxpayer would be catastrophic to the recovery.
In my opinion, the best thing Congress can do for the economy is rebuild the tax code from scratch using the Bowles-Simpson deficit reduction plan as a guideline.
Not only is Bowles-Simpson the most sensible plan, but it also the only one that leaves no sacred cows untouched. http://bit.ly/noTDPF
Wouldn't it be great if all the frustration with Congress could suddenly be mobilized and focussed?
The rage expressed by supporters of the Kommen foundation is an example of what I mean. That rage could be expressed in the question, "How dare you subvert the goal of womens health care to pander to an out of touch fringe group?"
That type of question for the Congressional GOP is, "How dare you continue to play the same stupid game of chicken with the American economy in the hopes of removing a single person from office?"
You're so right, Pat. Problem is that nobody ever seems to be unhappy with their own state's congresspeople. It's always the other guy's representatives who should be voted out of office. How do I know? I've lived in one of those "it's the other guys" states the last 32 years, and my vote never makes any difference. Lord only knows I've tried my best, though.
Pardon me? My "representative" is Ben Quayle and "my" Senators are McCain and Kyl.
I assure you, I will vote against them. Assuming, contrary to expectations, that the Democrats actually run someone against them. In Arizona it's usually a wast of money and someone's time.
these yahoo can f-up a wet dream with a condom on. so would not put it pass them to continue to obstruct and sabotage.
I now must report you for your use of condom and wet dream both of which I am sure are considered a threat to humanity and the church of right winged lunacy.
I was thinking along the same lines--sabotage. But the upside is that failure to pass the payroll tax extension, tax cuts and the rest can be blamed on the Republicans. That is a potent argument for the Dems and Republicans know it. Don't be surprised if the Tea Party obstructs any of these things to play more brinksmanship games. It still works for the Dems. In fact, Dems should want the Tea Party to hold these things hostage because this is what voters will remember by the elections.
And Congress replied, "Or you'll do what, punk?"
Maybe the President should have phrased it differently, like "Go ahead! Muck it up. Vote down the Payroll tax cut. Start construction on the Keystone XL pipeline. Outlaw contraception and Planned Parenthood. Give the rich more tax breaks. Reward outsourcing with huge bank loans. Deregulate Wall Street immediately. Kill the NLRB and outlaw collective bargaining. Bomb Iran. Send troops back to Iraq. While you're at it just level the mountains of Afghanistan and move on into Pakistan."
Reverse psychology.....
Paul,
Thank you for clearing up your point.
The Bush Tax Cuts are a very divisive issue. On the one hand, they have not worked as well as intended and have driven up the debt in response. However, to repeal them now and raise tax rates on every taxpayer would be catastrophic to the recovery.
In my opinion, the best thing Congress can do for the economy is rebuild the tax code from scratch using the Bowles-Simpson deficit reduction plan as a guideline.
Not only is Bowles-Simpson the most sensible plan, but it is also the only one that leaves no sacred cows untouched. http://bit.ly/noTDPF