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Can’t Get No Stimulation


It is sad to see that the U.S. Congress is having trouble even passing just $24 billion for unemployment insurance at a time when the economy is weak and unemployment is at nearly 10 percent. This shows the power of right-wing ideology in this country: Even the simplest, smallest and most obvious steps to relieve economic misery can be held back.

It seems that the right has made headway in convincing some politicians, and a good part of the media, to take seriously their message that government spending is the problem rather than a solution for our economic ills. However, the public is far from convinced: The latest Gallup poll finds that Americans favor “additional government spending to create jobs and stimulate the economy” by a huge margin of 60 to 38 percent.

The majority view is supported by basic economic logic. It was the collapse of private demand – consumption and investment – brought on by the bursting of an $8 trillion housing bubble that put us in this mess. Since our trade deficit is growing again, as a matter of accounting that leaves only government spending to give the economy a boost until private spending is sufficient to bring us back to full employment.

The unemployment report for May – which showed a mere 20,000 non-Census jobs created, compared with 217,000 the prior month, was a reminder that private spending is still a long way from leading this economic recovery.

The choice is simple, really: more stimulus or more unemployment. And more poverty, and more people losing their homes and health insurance.

The White House projects it will take nearly eight years – until 2018 – for unemployment to reach 5.2 percent, or what is considered full employment. This causes real long-term economic and social damage. For example, we know that children’s achievement test scores fall with family income. And the layoffs of teachers across the country will also take their toll on education.

Young workers entering the job market will face not only poor job prospects but reduced income over their working life. Since the lower-paid and least educated are hardest hit, this period of prolonged unemployment will worsen income distribution in the United States.

This misery and pain is unnecessary, since the government is capable of creating employment and increasing economic growth. Right-wing politicians argue that the last 16 months of stimulus have not worked, since unemployment remains at 9.7 percent. This is nonsense. The non-partisan Congressional Budget Office estimates that the stimulus has created between 1.2 and 2.8 million jobs, and private estimates – from across the political spectrum – are in the same range. The problem with the stimulus is simply that it has not been big enough – it has replaced perhaps one-tenth of the loss of private demand.

This has been more of a problem in recent months, as the cutbacks by state and local governments have actually outweighed the Federal stimulus, giving the economy a net negative contribution from government overall.

Those who think that the federal deficit and the national debt preclude a stronger stimulus should take a look at the facts. Most of the present deficit is a result of the recession, and will disappear as the economy returns to full employment. The long-term deficit problems are completely a result of our out-of-control health care costs, which are a disease of the private sector – not the government. And with inflation at two percent, the Federal Reserve can even finance stimulus spending by buying U.S. Treasury bonds.

Nothing that our government spends now to relieve suffering and restore employment will necessarily burden future generations. On the contrary, it is the failure to act that will hurt them.

MARK WEISBROT is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.



Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

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