THEY’RE STILL GETTING IT BACKWARDS…. I sometimes get the sense that congressional Republicans want to appear ridiculous on economic policy. It would explain a few things.
When the economy was in free-fall and there was talk of a depression, GOP lawmakers recommended tax cuts and a spending freeze. Fortunately, they were in the minority. More recently, the same Republicans who trashed the economic recovery package they opposed en masse suddenly began touting the ways in which it’s helping their constituents.
At the same time, however, they’re calling for the repeal of the stimulus, just as the economy starts to turn the corner. In July, Sen. Jon Kyl (R) of Arizona, the #2 Republican in the Senate, said he’d like to see all stimulus efforts come to end — wrap up the pending contracts and then stop recovery investment altogether. This morning, Rep. Eric Cantor (R) of Virginia, the #2 Republican in the House, said the same thing, calling the cancelling of the stimulus “the responsible thing” to do.
Yes, this is the same Eric Cantor who’s bragged about the benefits of the recovery efforts in his district.
The evidence of how wrong the Republicans are on this is hard to ignore.
The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.
Economists say the money out the door — combined with the expectation of additional funds flowing soon — is fueling growth above where it would have been without any government action.
Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter — something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.
For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. “Without that extra stimulus, we would be somewhere around zero,” said Jan Hatzius, chief U.S. economist for Goldman.
“The signs of the stimulus are there,” Allen L. Sinai, chief economist at Decision Economics, a forecasting firm in New York, said a couple of weeks ago. “Government — federal, state and local — is helping take the economy from recession to recovery. I think it’s the primary contributor.”
The Economic Policy Institute’s Josh Bivens responded to the recent GDP numbers by noting, “The marked improvement in this quarter relative to last is largely due to the American Recovery and Reinvestment Act.”
Here’s a tip for future reference: if you want the country to prosper, do the exact opposite of whatever Eric Cantor recommends on economic policy.