Three hundred economists released a letter to President Obama today with one message: focus on jobs, not on the deficit. Robert Borosage, co-director of the Institute for America's Future and one of the authors of the statement, said the letter is "a call for action on the economy and a return to economic common sense" in a conference call with the media this morning. This is not the time for balancing the budget and slashing the deficit, he pointed out; rather, it is "the time for bold initiatives to rebuild America and to generate jobs and growth."
The storyline that we have out of control government spending right now is "one hundred eighty degrees from reality," said Dean Baker, ND20 contributor and co-director of Center for Economic and Policy Research on the call. What is the real problem here? Long-term, it's spiraling health care costs. Without getting those under control, no matter what else happens the US will have a huge financial burden in the long run. "It's not the deficit; it's health care," he warned.
Robert Kuttner laid it all out plainly: it's "really about a high road to recovery versus a low road to fiscal balance." The high road: increased public investment, leading back to easy fiscal balance. The low road: fiscal austerity now, at the cost of whacking the economy. Want a great example? Look no further than World War II. The modest deficit spending of the New Deal was no match for the spending in the run-up to war, which thrust the economy back into recovery.
And finally Robert Reich, the former Secretary of Labor, was perfectly clear on where he stands: "There is a serious danger that if we continue with the policies that we are now seeing in Washington, we're going to have not just a double dip recession, but we are toying with the possibility of much more serious deflation and a US lost decade analogous to Japan's lost decade." There are only four sources of economic demand, three of which — consumers, businesses, and export countries — have problems of their own, he reminds us. Government is the last source when all else fails — and all else IS failing. If we can't learn the lesson from these facts, Reich thinks we risk repeating 1937, when FDR listened to budget balancers and deficit hawks. His move "plunged us back into depths of very deep depression," and he says we're in danger of doing the same thing all over again unless we can "stop our obession with short-term deficits and understand both economic logic and history."
Read the full letter here.
Other economists are also making noise about this issue. The New America Foundation recently released "Plan B for Economic Recovery", which included a statement from ND20 contributors Marshall Auerback and James K. Galbraith, called for a focus on jobs and progressive ideas to get the economy back on track. And Washington Post blogger Ezra Klein just ran an interview series, "Blue Skies," that lays out different ideas to kick-start job creation from Dean Baker, Heather Boushey, Michael Lind, and others. Moral of the story: this recession demands creative and bold action, not a resort to fear.