A DECISION TO MAKE…. The Washington Post‘s Frank Ahrens had an interesting item yesterday, noting a “raft of bad economic data” that was released yesterday — before this morning’s awful jobs report. Ahrens noted, for example, the “terrible home sales number,” which coincided with “weak construction spending” and an unexpected drop in U.S. manufacturing activity.
The big takeaway? It’s becoming apparent that this recovery, which began in March 2009, was based almost fully on government stimulus. The private sector has failed to kick in because it doesn’t trust the future. Without private sector money in this economy, we can do one of two things: deflate and contract, and we know where that leads — deep recession and possibly depression; or approve billions in new stimulus, which will only explode our already massive public debt and budget deficits, which was dragging states down one after the other.
Glad I’m not making the decisions.
Well, the decision really doesn’t sound that difficult. It’s similar to the decision we faced early last year.
In the wake of Republican policy failures, Democrats inherited two related problems: a deep recession and huge deficit. Addressing both wasn’t an option — dealing with one problem necessarily made the other worse. The Democratic majority decided economic growth and job creation was more important than the deficit, which was clearly the right call. At that point, they had to choose between competing options:
1. Pass a massive, ambitious economic stimulus.
2. Pass a trimmed down economic stimulus that could overcome a Republican filibuster.
3. Do nothing.
4. Pass a five-year spending freeze proposed by confused congressional Republicans at the time.
Left with limited options, Democrats went with Door #2. We would have been better off with Door #1, but we can all be very thankful Doors #3 and #4 were rejected. Indeed, it’s genuinely pathetic to hear Republicans this morning boasting that the stimulus “didn’t work.” It did work — the Recovery Act prevented a catastrophic depression — and their alternative at the time permanently undermines their credibility on the subject.
But as the stimulus comes to an end, the economy is slowing badly (which largely helps prove that the stimulus kept us afloat for over a year), and we’re left with another choice — a very similar choice to the one we faced 17 months ago. Look at Ahrens’ take again: we can either let the economy fall backwards or we can add to our debt.
That this is even considered a tough call strikes me as rather bizarre.
Indeed, as this debate heats up — and I sincerely hope it does — pay careful attention to the fact that conservative lawmakers don’t have a competing vision to improve the economy. By their own admission, strengthening the recovery isn’t the goal; lowering the deficit they created is the goal. They’re not only offering the wrong answer; they’re asking the wrong question.
The economy appears to be slowing. The threat of another recession is real. It’s not too late to get the recovery back on track, but it’s gut-check time for U.S. leaders.
Are they up to the challenge?