House Speaker John Boehner (R-Ohio) said this week that when it comes to the economy and the experts, “Republicans are listening.” If that’s true, Republicans are hearing lots of suggestions about boosting the economy with additional stimulus.
Take Republican Bill Gross and Democrat Mohamed El-Erian, the chief investment officers of the giant bond fund Pimco, for example. Both support long-term debt reduction, including entitlement curbs, but both also believe “the government needs to arrest America’s dangerous economic slide.”
In fact, their prescriptions are more aggressive than any the White House has proposed or appears to be contemplating for President Obama’s planned speech in September. Among them: direct federal hiring to reduce unemployment and increase lagging demand.
Mr. Gross, a billionaire acclaimed for his early warnings that the dot-com and subprime mortgage bubbles would burst, said, “Capitalism in its raw form can’t pull us out of this hole.”
If it feels like this sentiment keeps coming up, that’s because it does. Economists and the financial industry want policymakers to boost the economy. Wells Fargo lowered its growth projections last week, and said conditions will get worse “without policy intervention.” The conservative Financial Times argued this week, “In broad terms, the needed elements are plain: further short-term stimulus combined with credible longer-term fiscal restraint.”
The pushback against the Republican austerity agenda is arguably even more intense. Jamison Foser explained this week:
J.P. Morgan says “fiscal tightening” will worsen the “negative feedback loop” hindering economic growth. Greg Ip notes, “A shift toward fiscal and monetary austerity in the United States in 1937 helped prolong the depression. Fiscal tightening helped push Japan back into recession in 1997.” Jared Bernstein argues for more stimulus. Larry Summers, too. Bruce Bartlett, a policy advisor to Ronald Reagan and Jack Kemp, writes, “the important thing is for policy makers to stop obsessing about debt and focus instead on raising aggregate demand.”
And this doesn’t even include warnings from the Federal Reserve and the Congressional Budget Office that aggressive spending cuts would weaken an already fragile economy.
It’s against this backdrop that House Republicans believe “every economist” agrees the GOP is on the right track.
“Republicans are listening”? Listening to whom, exactly?