Yesterday, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, explored in some detail the effects of a deficit-reduction package. His comments generated almost no media attention, which is a shame because they seem rather important.
Elmendorf argued that, in the medium and long term, small deficits could improve economic output. But what about now, in the short term, when the economy is struggling badly?
In the short term, while the economy is relatively weak and economic growth is restrained primarily by a shortfall in demand for goods and services, the policy would decrease the demand for goods and services even further and thus reduce economic output and income. [emphasis added]
The CBO director’s comments came the same afternoon as Federal Reserve Chairman Ben Bernanke reminded Congress that the recovery is still fragile, and that “sharp and excessive cuts in the very short term would be potentially damaging to that recovery.”
Let’s recap, shall we? The economy is weak, unemployment is inching higher, and the public desperately wants policymakers to focus on making things better. Republicans are demanding steep spending cuts, and pushing to have the cuts take effect immediately. The Federal Reserve and the Congressional Budget Office, on the same afternoon, argued publicly that the GOP plan would likely weaken a struggling economy.
I often struggle to understand exactly why major news organizations make the decisions they do, but shouldn’t this be a huge story? Shouldn’t news outlets at least notice that the Fed and the CBO are warning the public that the Republican Party’s top priority will make an already-weak economy even worse?
Doesn’t that seem like the sort of thing Americans might want to know right now? You know, before there’s a deal to slash spending to satisfy the GOP’s hostage strategy?