Guest Blog by Sam Rhodes: Deficit Boogeyman and Jobs

2008 Nobel Prize winner for economics Paul Krugman, who has authored 20 books and more than 200 papers on the subject, offered an enlightening viewpoint on another aspect of spoon-fed fear in The New York Times in February.

In a sudden hysteria that could be likened to swine flu on many levels, Washington now has a chorus of hand-wringing-fear-filled politicos belting out a song of despair. And it now appears this choir has warbling voices from all corners of political ideology.

This unlikely acapella emanates from a bizarre belief that there is no time like the present to lower budget deficits. While I am no Krugman (who is?) a simple checkbook balancing approach and a look into the past while analyzing the present could reel in these Nervous Nellies if they just take the time to stop and think.

Checkbook: If my wife Karen and I are out of a job and private sector jobs are stymied, where can we hope to find relief? As bad as the budget deficit choir hates to admit it; government. But if government stops creating jobs by cutting spending through deficit reductions, well, I think you get the picture: How Now Brown Cow?

History Past: Hardly a word can be mentioned about the current economic mess in the world without talk of The Great Depression. Actually, many Americans wrongly believe that this event unfurled during October of 1929. Black Tuesday was not The Great Depression. One must analyze a time line of events in the run up to and some years after 1929 to understand this beast we fear. And to say that WWII was the silver bullet that saved the world from economic ruin? Wash your mouth out with soap.

In 1934, 5 years before America entered WWII, Sweden became the first nation to recover fully from the Great Depression. It followed a policy of Keynesian deficit spending. And actually, America’s economy improved greatly in 1934, when unemployment “fell” to 21.7 percent—over twice today’s level.  Furthermore, America passed major legislation in 1933, 1934 and 1935: Congress authorized creation of the Agricultural Adjustment Administration, the Civilian Conservation Corps, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the Federal Emergency Relief Administration, the National Recovery Administration, the Public Works Administration and the Tennessee Valley Authority. Congress passed the Emergency Banking Bill, the Glass-Steagall Act of 1933, the Farm Credit Act, the National Industrial Recovery Act and the Truth-in-Securities Act. These government agencies all created thousands of jobs for a very unemployed nation, not to mention cleaning up a very dirty house of unbridled corruption and government payola.

In 1936, deficit spending aided a phenomenal record of 14 percent growth. Roosevelt errantly cut back on deficit spending, worried about balancing the budget, causing the economy to slip back into a recession in 1938. In 1939, FDR began deficit spending that halted the slide of the economy. It resulted in some massive growth numbers. Roosevelt’s average growth of 5.2 percent during the Great Depression is even higher than the Reagan administration’s vaunted 3.7 percent history of economic growth in its highest years.

History Present: I am of the opinion that without jobs, none of President Obama’s—or America’s—agenda to rebuild an America with hope based on change will come to pass in the history books of our future.

Speaking of hope, one President in America has a sextant he is using to guide workers on a course to a jobs creation voyage to steer America out of its current doldrums. His name? Rich Trumka. The AFL-CIO Jobs Initiative

is that ship. And this vessel of hope must be staffed with strong, sea-worthy sailors from labor, unafraid of storms and a stomach for a broadside. He has one of those old salts he needs by his side in this fight in AFSCME ’s President Jerry McEntee, who last month climbed aboard the AFL-CIO jobs ship and called on his members to do likewise. “Federal action is needed to keep our economy from slipping back into the ditch. That is why a robust investment in the vital public services we need during tough times must be a part of federal jobs legislation. Too many services in communities across the country are being cut to the bone. State and local governments need help and they need it now.”

Both of these great Presidents are mobilizing their memberships around a simple fact: No jobs; no America. And, as history has proven, a dose of deficit spending with an emphasis on job creation has a great track record.

Oh, and for those who say “What about Italy with its current debt of 105.8% of GDP

?” Take another look. Italy currently ranks above 26 other European countries in GDP. Maybe all this hand-wringing, worrisome stuff about deficit spending is just wasted time. But I’m not the expert. I’ll defer to Paul Krugman to finish this piece with the main point of this viewpoint.

Krugman: “The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs…Thanks to deficit hysteria, Washington

now has its priorities all wrong: all the talk is about how to shave a few billion dollars off government spending, while there’s hardly any willingness to tackle mass unemployment. Policy is headed in the wrong direction — and millions of Americans will pay the price.”

Sam Rhodes ASEA/AFSCME Local 52, AFL-CIO Anchorage, AK

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Alaska Center for Public Policy

Posted on April 6, 2010, in General. Bookmark the permalink. 2 Comments.

  1. True. We all need to stop worrying about deficits.

    • Stan is correct. Fretting deficits is among the least of concerns in the immediate future. We need GOOD jobs. Now.

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