The Lack of Jobs Is the Problem, Not Deficits
by Nick Schwellenbach, 5/15/2013
Budget deficits are shrinking at a breakneck pace now and will continue to do so over the next several years, according to the Congressional Budget Office (CBO), which released its latest projections on the budget and the economy on May 14. Meanwhile, we have anemic jobs growth that’s worse than it should be, in large part because of all the extreme deficit reduction measures we’ve seen over the last few years.
The CBO estimated that we’ll have a government deficit about $200 billion smaller in 2013 than previously projected and that deficits over the next decade will be over $600 billion less than the office earlier thought.
But if we want more jobs and stronger economic growth, the government should be spending more money in the near term. The time to pay off the debt by running budget surpluses is when the economy is strong, not when it is weak.
As The New York Times reported last week, "The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending" under the Budget Control Act of 2011 and the sequester.
One of the most direct ways Washington, local, and state governments are going in the wrong direction is by laying off public employees. Unlike past recessions, when government expanded employment, our austerity-obsessed decision makers are actually cutting government workers.
The rollbacks in the government workforce are making America’s unemployment problem worse. When public employees lose their jobs, there are “multiplier effects” – when people lose their jobs, they cut back on spending and this reduces economic activity and growth. Compared to 30 months after the end of past recessions, we’re doing miserably when it comes to job creation.
We should stop the mass layoffs of public workers who educate our children; keep us safe from unsafe products, foods and medicines; defend our nation from a variety of threats; and more. Then beyond that, as Larry Summers, former National Economic Council chairman, recently told The New York Times Magazine, there should be a "10-year commitment by the government to spend $1 trillion on infrastructure" to spur job growth and rebuild America’s crumbling infrastructure, which is key to broad-based prosperity.
Image in teaser by flickr user photologue_np, used under a Creative Commons license.