Editore"s Note
Tilting at Windmills

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January 26, 2011

QUOTE OF THE DAY.... Last night, Digby was watching CNN's pre-speech coverage of the State of the Union, and noted that Piers Morgan explained that Britain "went with GOP-style austerity and now have .5% lower GDP." His CNN colleagues, Digby added, "looked confused."

That's not unexpected. Much of the media has bought into the nonsense, accepting the Republican line that taking money out of the economy, and undermining consumers' buying power, will somehow help promote growth.

Here's how Morgan put it, after Wolf Blitzer noted "they've had some radical cuts in Britain and elsewhere and Europe as well. And folks aren't happy about it, but they have no choice." Morgan said:

"And here's a fascinating parallel. Britain has been through this exact kind of conundrum a few months ago. And David Cameron's government decided that they would go the Republican route. They would slash the deficit by cutting public spending. And today, this morning, out came the figures. The economy has shrunk by 0.5 percent.

"Now, there are lots of excuses. They're even blaming the weather. The reality is if you do this you're taking a huge gamble with the strength of your economy. And you now have a clear divide between the Republicans and the Democrats. President Obama is saying freeze, invest, grow. Republicans are saying slash, don't invest, grow. One will win."

No wonder the rest of the CNN panel looked confused -- Morgan was offering an accurate assessment.

Prime Minister David Cameron's coalition government received a sharp political jolt on Tuesday with the release of official figures showing that Britain's economy contracted slightly in the last three months of 2010, prompting some economists to warn that the country was at increased risk of a "double dip" recession after four consecutive quarters of modest growth.

While the economic figures are subject to revision, the 0.5 percent shrinkage fell well short of the 0.5 percent growth many economists had predicted. And the wider message seemed clear: The slowdown placed the Cameron government's $128 billion, four-year program of spending cuts and tax increases -- policies on which it has staked its survival -- at sharply heightened political risk.

The net effect of the new figures was to blunt the government's momentum and to recast — at least until economic growth resumes -- the role Britain has played in the global debate about the best way back to prosperity.

Remember, just this week, Sen. Jeff Sessions (R) of Alabama said it's imperative that President Obama follow the lead set by our friends across the pond: "We need a [U.S.] budget with a bold vision -- like [the one] unveiled in Britain."

You mean the one that helped bring the British economy to a screeching halt, senator?

Steve Benen 4:20 PM Permalink | Trackbacks | Comments (32)

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Comments

the Republican line that taking money out of the economy, and undermining consumers' buying power, will somehow help promote growth.

So leaving people's money in their own hands is "taking money out of the economy"? Have you looked at the Stanford analysis of analysis on where the stimulus money went?

Nice try but even MSNBC thought it was weak.

Posted by: Mike K on January 26, 2011 at 4:22 PM | PERMALINK

So wait...

Having healthcare like England - that's bad
Having cruel austerity-style budgets like England - that's good

Man, Republicans are so confusing....

Posted by: ChicagoCat on January 26, 2011 at 4:22 PM | PERMALINK

The pundit echo chamber is so powerful, they are helpless to exercise any critical thinking, much less common sense. Why I distinctly remember how, as I sat with my elderly mother in 1998, all the Sunday morning talking heads were telling us that Bill Clinton was going to resign any minute. He'd have to, Cokie Roberts, et al., were saying. And yet, he was enjoying about 60+% favorability ratings at the time.

This is nothing new, unfortunately. Otherwise, we could hope it would stop.

Posted by: David in NY on January 26, 2011 at 4:29 PM | PERMALINK

I am sorry Mike, but exactly how do you grow the economy by removing money from it? I am asking for the way that would work, not just -- we slash services and magically the economy will grow. Isn't your theory the same as reducing the number of calories you consume will result in a weight gain?

Posted by: Ron Byers on January 26, 2011 at 4:30 PM | PERMALINK

The trolls jump in to change the subject whenever it hurts them. In this case, bottom line: the Republican-style plan hurts the economy. By a GDP decline of .5% in Britain. Nitpick all you want, Mike K, you've got a loser there.

Posted by: David in NY on January 26, 2011 at 4:33 PM | PERMALINK

@Mike - so what you're (cited article) is saying is that the stimulus turned out to be somewhat uneffective and insufficient. Wait, where have I heard that before? It sounds very, very familiar. I just can't place it. Someone page Dr. K, he'll know.

And the "people's money" meme? Really, what is this the Y2K Hot Tub Time Machine? How did that work out, anyways, that whole "it's the people's money." (Bonus question: where was the Tea Party outrage at the time? Catnapping?) Doh!

Posted by: jsacto on January 26, 2011 at 4:36 PM | PERMALINK

Complex economies? It seems our current elected Congressional leaders need to go back to a basic math class to make sense of how 2+2=4!

To say cutting government spending will help grow our economy is to say all fecal matter smells like Fabreeze.

I can't understand why the Congressional Republicans are screwing with known factors, and producing confusion and minuses to our way of life other than they are doing it as a Machiavellian exercise to get their rather small constituency (the top 2% wealth in our nation) all that it wants (zero taxation rate) at the expense of a healthy economy, a healthy citizenry, and a healthy political culture!

As President Obama would retort, "WTF - Win the Future!" -Kevo

Posted by: kevo on January 26, 2011 at 4:37 PM | PERMALINK
So leaving people's money in their own hands is "taking money out of the economy"?

Cutting spending doesn't leave people's money in their own hands, in even a figurative sense. Cutting taxes might do that, but cutting taxes is completely different than cutting spending. While in the long-term it makes sense to seek to control deficits, you generally want to structure government finances in a countercyclical way so that you run a greater deficit (as a percent of GDP) to stimulate during a recession, and you close that gap during expansions.

You end up doing a lot of damage if, instead of this countercyclical pattern, you expand the deficit during expansions and try to close it during recessions.

Posted by: cmdicely on January 26, 2011 at 4:39 PM | PERMALINK

"..you now have a clear divide between the Republicans and the Democrats. President Obama is saying freeze, invest, grow. Republicans are saying slash, don't invest, grow. One will win."

ARG!! Does no one understand Keynesian economics?? (Is there any other VALIDATED economic theory??) The appropriate Keynesian statement is: borrow more now to invest, grow, then pay the debt with a vibrant economy. Freezing in a recession stunts growth-- and risks a depression.

What is really being said is BHO is not as advocating policies as wrong as the Repubs advocate. Sure would be nice if he ever advocated policies that are right.

Posted by: gdb on January 26, 2011 at 4:43 PM | PERMALINK

Too many more like that, that limey's gotta go back across the water...

Posted by: dr sardonicus on January 26, 2011 at 4:44 PM | PERMALINK

I noticed the phrase "tax increases" in the NYT article cited by Steve. Sadly, I expect the Republicans to assess blame for the contraction on those alone.

As St. Ronnie would say, "Well, gosh darn it, of *course* the economy didn't grow. It wasn't the decrease in spending that caused it -- it was those gosh darned tax increases."

(Then I'd note that this is something only the mythical St. Ronnie imagined by today's Ronnie-worshipers would say. The actual Reagan probably would have raised taxes.)

Posted by: Ian A on January 26, 2011 at 4:46 PM | PERMALINK

You have to love the deer-in-the-headlight looks when someone outside of their Village circle of jerks says something that they haven't navel gazed yet and absorbed as a meme.

Morgan will, I'm sure get the speech from "Network" today, and if he doesn't play nice with Wolf and the rest of the 'worst political team on television,' well, back across the pond for you, Piers.
Regis is soon available and can take your place taking Larry's place PDQ.

Posted by: c u n d gulag on January 26, 2011 at 4:54 PM | PERMALINK

This country is a full-blown idiocracy.

What? Cutting spending doesn't increase GDP? And crops don't like Brawndo? Who knew?

Posted by: square1 on January 26, 2011 at 4:57 PM | PERMALINK

I don't think most Americans -- or most of the CNN panel -- think in terms of economics, cash flows, numbers, or money.

They're thinking on a much more basic, almost religious level. We must appease the gods by sacrificing. Those at the bottom of the ladder obviously have offended the gods most, so they should bear the brunt of it. Those at the top are obviously favored by the gods, so they must be favored. We must scourge and purify our nation, so the gods will be pleased again.

Economics is math, and math is hard. Much easier to fall back on mumbo-jumbo and the limbic system.

Posted by: bleh on January 26, 2011 at 4:57 PM | PERMALINK

The simplest, and most effective retort against conservative policies is that they just don't work. Sometimes I doubt their sincerity, but much more, I doubt their wisdom.

This hasn't always been the case; conservatives have had wise policy positions in the past. Since they have given up policy analysis for emotive populism, the lack of conservative wisdom is almost always the case. Someday the talk radio rabble rousers will lose their influence, but until then all conservatives have is bombast.

Posted by: danimal on January 26, 2011 at 5:02 PM | PERMALINK

But a double dip recession would help Republicans in '12, so why wouldn't they push those policies that would lead to another recession?

Posted by: golack on January 26, 2011 at 5:08 PM | PERMALINK

When it comes to the economy, my theory is this:

If you have two courses of action to choose from,and Republicans are advocating for one and claiming that the other will "Destroy the economy"
The right choice is the one that Republicans claim will destroy the economy.

Posted by: atlliberal on January 26, 2011 at 5:08 PM | PERMALINK

square1. . . but it's got electolytes. . .

On a serious note, way to go Piers! And here I was thinking that he was going to a completely worthless boob like the rest of CNN's staff.

Posted by: Mitch on January 26, 2011 at 5:15 PM | PERMALINK

danimal wrote: "The simplest, and most effective retort against conservative policies is that they just don't work."

On the contrary, conservative policies work very well -- at concentrating wealth and power in the hands of a wealthy and powerful minority, at the expense of, and to the detriment of, everyone else.

Which is exactly what they are intended to do, and exactly what they have very effectively done, wherever and whenever they are implemented.

Of course, the Republicans have to lie about what their policies are intended to do, so that someone other than a handful of ruthless, rapacious, reactionary, sociopathic billionaires will vote for them.


Posted by: SecularAnimist on January 26, 2011 at 5:25 PM | PERMALINK

If the world made sense, the GOP would have zero credibility on economic matters, especially on their zombie-like "spending" line.

First, GOP policies and strategies nearly caused our economy to collapse. Then, last year, at the expense of the safety, well-being and security of the country, they insisted we borrow hundreds of billions more dollars in order to renew an expired tax cut for the purpose of allowing their wealthiest patrons to stuff their pockets at the expense of the nation.

Why Republicans given ANY credibility on economic matters, I don't know.

Posted by: June on January 26, 2011 at 5:30 PM | PERMALINK

A 0.5% contraction of a major industrialzed economy over the course of only three months ain't a "slight contraction."

Posted by: Chesire11 on January 26, 2011 at 5:40 PM | PERMALINK

At least the British have the good fortune of operating under a Parliamentary system in which new elections can be held when old policies prove to be a train wreck. They also enjoy a coalition government in which the junior party is likely to start to get antsy when they start to see how their brand is being tarred with the failure brush because of the senior partner's harsh policies. That means they could face a no confidence vote at any time as the new double-dip recession begins to take hold and the banksters laugh all the to their summer holidays while the rest of Britain swelters under continued contraction in the next six months. Does Cameron survive the year?

Posted by: PrahaPartizan on January 26, 2011 at 5:59 PM | PERMALINK

The mystery is why the Brits thought laying off thousands of government workers during a severe recession would be good for the economy. Those families will cut spending to the bone, demand will fall still more and the recession will deepen. They must have been imagining they were Thatcher but forgot she made her deep cuts in government during a period of private sector growth. The private sector was then able to take up the slack, but thanks to the banksters, that's not the case now. Three cheers for the British conservative party. They're the canaries in the coal mine for sure. And if they keel over, maybe it'll take some momentum away from the Tea Party.

Posted by: dalloway on January 26, 2011 at 6:00 PM | PERMALINK

"The mystery is why the Brits thought laying off thousands of government workers during a severe recession would be good for the economy."

The real mystery is why when faced with the results of the failure of the British experiment anyone would be in favor of laying off thousands of American government workers during the beginning of a recovery. There are two possible answers. The proponents of slashing are trying to destroy the American economy and make things worse for the American people, or they are stone cold stupid.

Posted by: Ron Byers on January 26, 2011 at 6:09 PM | PERMALINK

There are two possible answers. The proponents of slashing are trying to destroy the American economy and make things worse for the American people, or they are stone cold stupid.
Posted by: Ron Byers on January 26, 2011 at 6:09 PM

I'll go for the 3rd option -- the one you haven't mentioned. They hope that all the misery will be laid at Obama's door, to their electoral benefit. Because, long term, they don't give a f u about anything else, no matter the pretty mouth noises they make. I don't think they actually *want* "to destroy the American economy and make things worse for the American people" but, if that's the side effect of their actions... so be it.

Posted by: exlibra on January 26, 2011 at 6:27 PM | PERMALINK

Red alert: outlier on the CNN panel. Someone knows what they are talking about. Methinks Piers Morgan will not be welcome at the next cable news Beltway insider blatherfest. By the way, Jeff Sessions remains the dumbest person in the U.S. Senate.

Posted by: max on January 26, 2011 at 6:37 PM | PERMALINK

given that huge amounts of our deficit is being financed from outside the US, running that deficit actually ADDS huge amounts of money to the US economy, doesn't it? if China buys $500b in treasury bills, that money is spent mostly in the United States (on things made in China, of course) if the Feds cut spending tomorrow to only match tax revenues, we would be losing probably 900 billion in direct foreign investment in our economy. but hey, what's 900 billion between friends?

Posted by: northzax on January 26, 2011 at 8:21 PM | PERMALINK

NPR's Planet Money blog/podcast team did a story a couple of weeks back that's highly relevant here:

http://www.npr.org/blogs/money/2011/01/11/132832589/burning-money-to-heat-the-city

Synopsis: Estonia enacted strong austerity reforms to meet the rules required to by the E.C to join the Euro currency. They slashed spending and cut their debt to near zero. They also had 20% unemployment.

-Scott

Posted by: sbest on January 26, 2011 at 11:28 PM | PERMALINK

Whups, wrong episode:

http://www.npr.org/blogs/money/2011/01/19/133033971/the-tuesday-podcast-the-euros-model-student

-Scott


Posted by: sbest on January 26, 2011 at 11:31 PM | PERMALINK

The stimulus failed???? What's our GDP? What is the GDP for the countries that implemented austerity measures?

BTW, I was shocked to see what country has the highest GDP rate in 2009: Afghanistan with over 22%. Could this be right?

Posted by: Paula on January 26, 2011 at 11:59 PM | PERMALINK

I wonder what raising taxes by $1.5 trillion would do to the U.S. economy. The alternative to budget cuts is massive tax increases. What would those tax increases do to the economy?

Why would anyone even dream of investing in the U.S. if taxes were raised by $1.5 trillion

Posted by: superdestroyer on January 27, 2011 at 6:46 AM | PERMALINK

superdestroyer,
I'm speechless at either the snark or the stupidity. Please let me know which it is. I know which way I'd guess.

Posted by: c u n d gulag on January 27, 2011 at 8:20 AM | PERMALINK




 

 

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