In the aftermath of the unmitigated capitulation on the debt ceiling, perhaps those of us on the left are not the only ones wondering how exactly we ended up in this situation.
I'd like to bring your attention to a few items in the today's press. Kate Zernike, writing in the NYT, claims the notion of a monolithic tea party staunchly opposed to anything other than massive spending cuts was largely a figment of our imaginations. Surprisingly she says, "when tea party supporters were asked if the debt ceiling agreement should include only tax increases, only spending cuts, or a combination of both, the majority - 53 percent - said that it should include a combination. Forty-five percent preferred only spending cuts."
More below the fold.
And just in the nick of time, JP Morgan comes out with an analysis showing that the debt ceiling plan as now passed by both chambers, will reduce GDP growth in 2012 by 1.5%. Given tepid GDP growth in the second quarter of roughly 1.3%, this essentially indicates that the misplced focus on spending cuts will likely ensure a return to economic stagnation.
As a further indicator of what may be coming down the pipe, consumer spending in June declined 0.2% for the first time in the past two years.
So, if government demand is declining and consumer demand is also slackening, where will the growth and jobs come from?
Keynes may be out of favor, but it certainly does not look like he was incorrect so far.