State, Local Governments’ ‘Secret Austerity’ Maintaining Recession

Ben Polak and Peter K. Schott make a compelling argument in the New York Times that this recession differs from the preceding two downturns because of under-employment by state and local governments:

Without this hidden austerity program, the economy would look very different. If state and local governments had followed the pattern of the previous two recessions, they would have added 1.4 million to 1.9 million jobs and overall unemployment would be 7.0 to 7.3 percent instead of 8.2 percent.

Why is this happening? One possibility is that we are witnessing a secular change in state and local politics, with voters no longer willing to pay for an ever-larger work force. An alternative explanation is that even though many state and local governments are constrained not to run deficits, they can muddle through a standard recession without cutting jobs. But when hit by a huge recession like that of 1981 or the latest one, the usual mix of creative accounting and shifting in capital expenditures cannot absorb the shock, and jobs have to go.

GAO Audit: Federal Reserve Gave $16 Trillion in Bailouts, Including to Foriegn Banks and Corporations

$16 Trillion

Amount given unilaterally by the Federal Reserve to banks and corporations around the world in bailouts after the financial meltdown at the end of the Bush administration, according toan audit by the Government Accounting Office ordered by Sen. Bernie Sanders, I-Vt. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

Borrow and Spend Policies of Bush, GOP Caused Employment’s Downward Slide

Click to see original
Click to see original

As we noted here last week, a new Quinnipiac poll found that voters blame George Bush over Pres. Obama for the economic crisis by 54 to 27 percent. Another 8 percent said they blamed neither president, 7 percent said they blamed both and 3 percent said they did not know or had no answer.

On a political level, what the chart above shows is the result of the Republicans’ strategy of “starving the beast” — or, as their cult leader du jour Grover Norquist put it, shrinking the government until it is small enough to drown in a bathtub.

It should not be surprising that only about half of Americans can remember who was responsible for the economic downturn, which happened way back in history, you know, three or four years ago. We are living in what Gore Vidal has called the “United States of Amnesia,” after all.

Sadly, what is surprising is that the percentage of Americans who remember Bush’s mishandling of the economy remains so high.

Since Bush left office in January 2009, two factors have been scrubbing away in tandem at the record of failure that was the Bush presidency, glossing it over and spiffing it up.


Republicans Desperately Want You to Believe The Stimulus Failed, But Facts Tell a Different Story

GOP House leader John Boehner and other Republicans insist stimulus spending was a waste. But did the Recovery act fail?

NO. According to the Economic Policy Institute:

The Recovery Act was enacted at a time when the private economy was contracting by more than a 6 percent annual rate and losing more than 750,000 jobs a month. In the first full quarter after its enactment, the Recovery Act had cut average monthly private job losses by more than a third and slowed the economic contraction to a -0.7 percent annual rate… EPI analysis shows that by the end of 2010 the Recovery Act had created or saved 3 million to 4 million jobs, and up to 5 million full-time equivalent jobs. It had also boosted gross domestic product by up to $560 billion and reduced the unemployment rate up to 1.8 percentage points.

Hey Tea Party: Deficit Would Be ZERO Now If Bush, GOP Hadn’t Put Two Wars on Credit Cards, Crashed the Economy


What U.S. deficit would be today if George Bush, with blind obedience from his rubberstamp Republicans in the House and and Senate (including Rep. John Boehner, Sen. Mitch McConnnell and others who are still there today), had not drained the Treasury by waging two wars using unfunded supplementals while simultaneously giving tax cuts to his millionaire “base” — and then crashed the economy by defanging financial regulations, defunding financial regulators and mismanaging the country’s finances through fiscal irresponsibility and recklessness.

Obama Reduced Federal Deficit By $103.6 Bil – Down 13% from 2009

More signs that Pres. Obama and the Democrats are succeeding in slowing or bringing the GOP-Bush Recession to an end, via Bloomberg:

The U.S. government posted a smaller budget deficit in August compared with the same month last year, helped by rising tax receipts.

The excess of spending over revenue totaled $90.5 billion last month, smaller than the median forecast of economists surveyed by Bloomberg News and down 13 percent from $103.6 billion in August 2009, according to a Treasury Department report issued today in Washington. The gap for the fiscal year that started in October was $1.26 trillion compared with $1.37 trillion last year at the same time.

The economic recovery has helped generate more tax revenue for the Treasury, even as the Congressional Budget Office forecasts the deficit this fiscal year will reach $1.34 trillion, the second-largest on record. The Obama administration faces the challenge of trying to limit the shortfall while stimulating an economy with joblessness close to 10 percent.

“We’re seeing the revenue coming back,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The cumulative deficit for the fiscal year is a bit smaller, but still fairly wide. It doesn’t signal a lot of improvement.”

Hey, haters: Presidents get blamed when the economy goes bad, even when, as was the case here, the president is not responsible for the policies that caused the downturn. Conversely, they also get credit when things go well — especially when, as is the case here, their policies caused things to turn around.

So don’t even start.

Gallup: 75% of Americans Correctly Blame Bush for Bush Recession

From left, Bush, Leach, Oxley
From left, Bush, Leach, Oxley
According to a new poll from Gallup, three-quarters of Americans still remember that the financial meltdown happened on George W. Bush’s watch.

However, just 19 months after the second greatest economic collapse of the past 100 years — and as a direct result of Republican efforts to rewrite the disastrous history of the Bush administration — a growing number of those surveyed said they are beginning to blame the Bush Recession on Pres. Obama. According to Gallup, in July 2009, only 32 percent — roughly the same number who self-identify as Republicans — blamed Pres. Obama. Now that number has risen to 50 percent. The jump in numbers was caused by the fact that 50 percent of independents and even 26 percent of Democrats now believe that Obama, who was a presidential candidate while serving in the Senate at the time of the meltdown, caused the recession.