Cutting government spending slowed the economy
Published August 3, 2014
by Ned Barnett, News and Observer, August 2, 2014.
How do you take a vacation from doing nothing? The Congress has done just that by adjourning for its August recess with a raft of pressing national issues left unaddressed.
But the truth is that Congress doing nothing has done something. It has created a serious drag on the economy and hobbled a recovery that otherwise would be in full run more than five years after the official end of the Great Recession.
The decline in federal spending has cut into the GDP for 11 of the last 12 quarters, the Huffington Post recently noted. That period coincides with the end of the stimulus and the start of Republicans driving the economy with both feet on the brake.
Despite the gridlock, the power of the American economy is beginning to break through. Growth jumped at a surprisingly strong 4 percent annualized rate in the second quarter with virtually every spending indicator up except one: federal government spending.
You have to wonder what might have been – how much financial pain we would have been spared – if President Obama had been given room for a larger stimulus and federal spending had not dropped off the fiscal cliff once the modest stimulus version ran out.
Instead, tea party zealots became hysterical about the debt ceiling, threatened shutdowns of government and forced cuts under sequestration while blocking Obama’s proposals for major infrastructure and jobs programs. The federal government has been switched off as a jobs generator both through its reduced spending and its lack of hiring. There are fewer federal employees today than there were in 2007.
This resistance to spending is mostly about blocking Obama at every turn while secretly rooting for a prolonged economic malaise that will boost Republican chances at the polls. But it’s publicly defended under the misleading rhetoric that the government must, like a family, stay “within its means.” Of course, families can’t print their own money or tax their neighbors and businesses, but the GOP insists the comparison is an apt guide to national economic policy.
The reality in the 21st century is that government employment and spending are inextricably interwoven into the whole economy. It’s not about taking money out of one pot (the public sector) and putting it into another (the private sector). For the private sector to flourish, the public sector must contribute. A prime example is the Research Triangle. This region has thrived on the relationship among private companies, state-funded research universities and massive federal research grants.
Conservatives may look at shrunken government spending and payrolls as positives, but they are not signs of leanness and efficiency. They are evidence of millions of steady jobs that have disappeared, diminishing the consumer buying power that drives the U.S. economy. The cuts in payroll and government spending overall haven’t kept the nation “within its means.” They’ve reduced its means by cutting public employment and forgoing public projects that would spur economic activity and generate more tax revenue.
Obama has come to view the obstructionism of congressional Republicans with less angst and more wry chagrin. In a speech in Kansas City last week, he welcomed the economy’s signs of recovery but noted that much of the improvement isn’t being felt by middle- and low-income Americans. He suggested that the missing gain is the hidden toll of doing nothing.
“How do we make sure we’ve got an economy that’s working for everybody?” Obama asked. “Imagine how much further along we’d be if Congress was doing its job.” He added, smiling at his understatement, “They haven’t been too helpful. They haven’t been as constructive as I would have hoped.”
North Carolina is enduring a double whammy of anti-Obama obstructionism and painfully wrong notions of cutting government spending to spur the economy.
Exhibit One, of course, is the refusal of the Republican-led General Assembly to expand Medicaid. That refusal’s effect on the economy is hard to quantify, but it’s significant and growing with every month the state holds out. Regional Economic Model Inc., a consultant retained by the state Department of Health and Human Services, estimated that the new federal funds from Medicaid expansion would have generated 25,000 jobs by 2016. Now the refusal is costing existing jobs as rural hospitals struggle to treat uninsured patients who would have been covered by an expansion offered under the Affordable Care Act.
Excessive tax cuts have starved the state budget and caused a decline in government spending and hiring. In the last five years, North Carolina’s overall government employment declined by 3.6 percent. Local governments, largely responding to tight state spending, now have 24,300 fewer jobs. The number of state employees is down by 4,200. This is occurring despite a steady increase in state population and in the demand for government services.
Now congressional Republicans and Republican state lawmakers have taken a summer break. Maybe if they stay away long enough, the economy will come all the way back.
http://www.newsobserver.com/2014/08/02/4046667/cutting-government-spending-slowed.html?sp=/99/108/
August 3, 2014 at 9:05 am
Richard Bunce says:
So by your calculation we should all drop our healthcare insurance and get all our medical care at the emergency room which would cause a significant increase in healthcare spending and the GDP would increase?
If the Democratic majority in Congress had not placed a lower income limit on the ACA Marketplace Tax Credit/Subsidy then the persons under 100% of poverty could have purchased fully subsidized healthcare insurance in the ACA Marketplace as those with incomes 100%-400% of poverty currently can with significant/full subsidies.
August 3, 2014 at 4:33 pm
Norm Kelly says:
In order for government spending to spur the economy, the government must FIRST take that money out of people's pockets. This means that people CAN'T spend that money cuz the government has already stolen it from them.
People spend money, how much of it goes into the economy? For libs, this is a trick question. The answer is 100%.
Government spends money, how much of it goes into the economy? For libs, again this is a trick question. Cuz first you have to subtract the amount that the government TOOK OUT of the economy before they could spend it. Then you have to calculate in the amount of overhead in ANY and ALL government spending. I've seen estimates of overhead reaching near 40% on some government spending schemes. So the net effect of government spending is about negative 40%. Simple math, even for libs. They won't like it but it's both honest and accurate.
$1 taken from the economy - 40% overhead for government waste = -1.4% effect on the economy.
Is the rest of this article worth reading? Nope. It's just more lib propaganda. If government spending is so darn good for the economy, then why aren't Eastern European countries experiencing the most robust economies in the world? This is like when the demons told us to believe them when they told us that increasing food stamp spending and increasing unemployment benefits both improved/encouraged the economy. This type of government spending is 'good' for the economy.
It appears the old demon scheme of expecting that the majority of legal citizens in the country actually are stup1d is in full swing. And we can count on N&D editorials to continue to support and encourage stup1d1tie. (i know it's mis-spelled. i'm trying to get past the auditors!) The point is valid though. No sense in printing the truth when printing the demon ally talking points will fill the pages just as well.
August 4, 2014 at 11:45 am
Richard Bunce says:
... and a significant amount of that tax revenue goes into the very rich compensation of the massive government bureaucracy that collects it, spends it, oversees it. That money likely finds it's way into their savings/investments just like the persons who the government confiscated it from were using it. The argument the government stimulus proponents make is that ANY government spending no matter how unnecessary/wasteful is ALWAYS more stimulative than ANY private spending. That keeps them from having to admit that it really is about income distribution rather than economic stimulus... although this time the stimulus seems to have primarily benefited the investment markets so the distributive effect of this stimulus seems to have been not particularly effective but at least the government bureaucrats received their cut.
August 3, 2014 at 7:22 pm
Norm Kelly says:
'You have to wonder what might have been ... if President Obama had been given room for a larger stimulus'. You mean for things like the 'shovel ready' jobs that didn't exist. Remember when the occupier, I think it was the ever funny/sad Joe, and some cabinet member, were sitting around and joked/laughed about the lack of shovel ready jobs for the stimulus money? You mean for more government give-away programs like Solyndra? That went bankrupt. You mean like Tesla Motors who couldn't wait for a plant here in the US so they designed, built, manufactured their cars overseas? You mean like the money that was given to solar panel producers that were LOCATED OVERSEAS? You see, some people just love socialism and proclaim it's wonders at every opportunity. Some of us remember the fiasco that has been and continues to be the Obama administration. Some of us are aware that this guy has been telling lies to the American people from the beginning. Like 'investing' in Solyndra. But it wasn't an investment. It WAS payback for a campaign supporter. Or like the payback to the auto workers unions when they were moved ahead in line to the debtors/investors in the auto industry. You remember, when this was another time that the occupier decided the law didn't apply to him and he could move the unions up in line just cuz he wanted to.
The country has added over 6TRILLION to the national debt since the occupier took over. What MORE do you socialists want to do to us? How much further into debt do you want to put us, with no plan to EVER pay it back? At what point will our national debt exceed our annual GDP? How exactly does government spending contribute to annual GDP growth?
Sometimes truth is necessary. I know this editorial appeared in the N&D. They are definitely known for carrying water for the Socialist Party of the US, and not known for truth telling. Kinda like when Mr. Paul told MSNBC that he'd talk about a specific topic when they started broadcasting truth 24 hours per day. So we'll set the record straight AGAIN. We'll start with the editorial drivel: 'tea party zealots ... threatened shutdowns of government'. What socialists want us to believe. But the truth is that it was the demon party that insisted on shutdown. It was ONLY demons talking about a shutdown. It was the demons who REFUSED to negotiate on the budget! It was the demons who did not come to the negotiating table and forced a government shutdown to happen. It was also the demon party who refused to negotiate AT ALL, even the littlest bit, on the debt ceiling. Demons would NOT budge at all - they insisted that it was all or nothing; their way or no way at all. The Republicans showed they had no backbone. They capitulated. When the Republican legislature in our state asked PERMISSION from the central planners to modify extended unemployment benefits so that we MIGHT be able to afford to pay it, the central planners refused our request. The central planner response was the same as when the demons refused to negotiate with Republicans about the debt ceiling and socialized medicine: No Way! It's the central planner/socialist way or no way at all! The diff between our legislature and the Republicans in Washington? They blinked, our legislature didn't. Our legislature decided that if Washington would NOT be flexible, would NOT negotiate at all, then the legislature would do what the central planners forced them to do. The central government shutdown got blamed then, and obviously the socialists continue to do it, so they should have never backed down and made sure all the news media outlets were full of Republicans telling the people directly that it was the failure of the demons to negotiate that forced the shutdown. As it was, the allies in the media made sure the story blamed Republicans, so why not get on EVERY media outlet available, nationwide, and tell the truth; force people like CNN & MSNBC to hear the truth, talk over the talking-heads, refuse to accept the demon talking points being put forth by the talking heads. Bring documentation with them to show how the Republicans had attempted to negotiate, but the demons had refused to budge on anything.
I like to quote the source whenever possible so everyone knows that I'm not putting words in their mouth. However, I'll finish the statement the way it should be finished rather than finishing it with the socialist bent. So: 'This resistance to spending is mostly about' the fact that the nation is already over $17TRILLION in debt and ALL of the demon plans, including the occupier's, exacerbate the problem. There is NOT A SINGLE proposal coming from ANY DEMON in Washington to reduce the deficit or debt a single penny. If there is any evidence, I wonder why not a single demon or editorialist reports on it or documents it. The only thing demons and socialists know how to do is spend more, tax more, go further into debt. Oh, and print money. What's the effect of printing money? Devaluing the dollar. Slowing the economy. Making it harder for the average American citizen, legal of course, to make ends meet on a daily basis.
It's interesting when big-government types lament the fact that government employment is down. In order to employ someone in the government, money MUST be taken out of the private sector, from the general economy, in order to pay that government employee salary. How much does the employee put back into the economy. Well, obviously, even using lib math, it's far less put into the economy than is taken OUT of the economy. Some of us are glad as he_l that government employment is down. There SHOULD be fewer government employees. The Post Office is a good place to start. Privatizing luggage & passenger screening at the airports would be another good step forward. In NC another good start would be to sell off ALL of the ABC stores, and privatize them. How does the state owning the stores, employing the staff, actually HELP the economy? How much tax money does it cost to run the ABC system versus how much does it generate in state revenue? If the ABC system was privatized, the employees worked in the private sector, yet the state continued to collect sales tax, wouldn't that be a net gain for the state? If you don't believe so, please prove your theory. I posit that not having all those employees, with all the highly paid administrators in place throughout the state, not having to pay for the buildings - either owning or leasing - but simply collecting taxes on the products sold, the state would gain a great deal. And if ANY of the store locations are OWNED and not leased, the state could sell the property and probably get a hefty income on that also. So, you see, it is possible to have fewer government employees (i won't call them 'workers') yet have it be a positive effect/affect on the economy. If the government owning businesses, employee people, selling product were good for the economy, the the state should take over ALL business and remove the private sector altogether! I think this has been tried in Eastern Europe. And obviously their economies are ROARING! Way ahead of us here, for sure! No? Wonder why? I've only presented 1 example. There are more, if you wish to exercise your brain. But if I can come up with one, why can't people who spend their days thinking about things like this, editorial writers who are paid to spend their time thinking about things like this, come up with even more examples? Why is it that the N&D reads the demon party talking points memo and then simply prints it as is or prints it with 'supporting' statements about how bad the Republicans are. The only thing this editorial writer didn't do was refer to the Republicans, either in Washington or Raleigh, as racists. I'm sure the editor in chief called this writer into the office for a good talking to for missing this talking point! I'll do it, cuz I know he wanted to: the only reason the Republicans in Washington fight the occupier as much as they do is because he's a black man and they are all racists. There. Feel better now? That statement makes as much sense as anything else this editorial writer had to say. Not only no common sense but no thought process either! What a shame. And a sham!
N&D editorial writers, here's an interesting topic to research & write about. You've obviously got time since most of your editorials are written for you by the demon party. Research countries that already are socialist and how their economies compare to ours. Who has more people that have the ability to move between income groups? Who owns more private property? Who's farms produce more crops/bigger crops? Who has more personal possessions, here or in the socialist utopia you claim exists? Show us SPECIFIC examples of where socialism is in place, has been in place, and the economy is better/stronger. Then maybe we'll start to believe you when you tell us how great socialism would be here, if we only let it happen.
