As Dean Baker of the Center for Economic Policy and Research pointed out, Republican criticism of President Obama for the condition of the economy is akin to criticizing firefighters for the condition of a house right after the firefighters had stopped it from burning down. When President Obama took office, the economy was losing 800,000 jobs a month. When President Obama took office, the economy was shrinking at an annual rate of 8.9 percent. The economy was burning down. Then the firefighters arrived. The Obama stimulus created some 3,300,000 jobs. Under President Obama's stewardship, the economy has recovered all private sector job losses. The only justifiable criticism of the stimulus is that it wasn't large enough to have sparked a full recovery, but that's not the Republican criticism.And this week's unemployment figures make it even more clear. In the United States, more jobs are being created than was expected, and unemployment is down to 7.9 percent. In the Eurozone, unemployment has risen to a record 11.6 percent. President Obama's stimulus policies are making things better. The conservative European austerity policies are making things worse:
Republicans continue to oppose stimulus spending. Republicans oppose any potential stimulus by the Federal Reserve. In other words, Dean Baker's analogy didn't go far enough. It's not just that the Republicans are criticizing the firefighters for the condition of the house right after the firefighters saved it from burning down, it's also that the Republicans lit the fire in the first place, tried to stop the firefighters from getting to the house, and now are trying to stop the construction workers from getting to the work of rebuilding it, while themselves planning to add more fuel and light another match.
According to a new study from the National Institute for Economic and Social Research, a London-based research organization, the austerity measures implemented across Europe in an attempt to get the continent’s debt under control and stem its financial crisis have actually made matters worse, stunting growth and increasing debt
Mitt Romney and the Republicans want to impose European-style austerity on the United States. It would be disastrous to allow that to happen. A week ago, Nobel Prize-winning economist Paul Krugman explained:
Mr. Obama’s camp argues for an active government role; his last major economic proposal, the American Jobs Act, would have tried to accelerate recovery by sustaining public spending and putting money in the hands of people likely to use it. Republicans, on the other hand, insist that the path to prosperity involves sharp cuts in government spending.It's that simple. The U.S. economy is recovering, but the world economy as a whole is not; and one of the main reasons the world economy as a whole not only is not recovering but is in danger of sliding into a global recession is because of the economic austerity policies pursued by conservative governments that Mitt Romney would like to emulate. And given its globalized nature, the drag on the world economy by the austerity agenda of conservative European governments is making President Obama's job that much more difficult in creating a sustained recovery in the United States. But if Mitt Romney becomes president, that drag won't be coming only from the global economy, it will be coming from the domestic economy as well.
And Republicans are dead wrong.
The latest devastating demonstration of that wrongness comes from the International Monetary Fund, which has just released its World Economic Outlook, a report combining short-term prediction with insightful economic analysis. This report is a grim and disturbing document, telling us that the world economy is doing significantly worse than expected, with rising risks of global recession. But the report isn’t just downbeat; it contains a careful analysis of the reasons things are going so badly. And what this analysis concludes is that a disproportionate share of the bad news is coming from countries pursuing the kind of austerity policies Republicans want to impose on America.
(Continue reading below the fold.)
The Guardian had more on the IMF report:
And the IMF admitted that it, like many other forecasting organisations, had underestimated the negative impact on growth of steep cuts in public spending. It said: "Staff research suggests that fiscal cutbacks had larger than expected negative short-term multiplier effects on output, which may explain some of the output falls."It's nice that the IMF is admitting that it underestimated the negative multiplier effects that fiscal cutbacks would have on output. Krugman was warning of it nearly three years ago. But he had foreseen it as far back as 1999. And he's been understandably frustrated that policy-makers haven't been listening. And with President Obama increasingly on board with the understanding that we need more stimulus, we have to hope that the voters now will be listening. Because the alternative would be disastrous. All we have to do is look to Europe.
The World Bank, which is holding its annual meeting alongside the IMF in Tokyo, added to the gloom with a report that warned of a cuts in growth across the developing world.
Back in April, I wrote about the cruel stupidity that is economic austerity, and I highlighted the ongoing European crisis, detailing the rising unemployment, shrinking economic output, political and social upheaval, and devastating human suffering. So besides record unemployment across the entire Eurozone, how has it been going since?
- Greece is getting worse. Dangerously worse:
Greece's far-right Golden Dawn party is increasingly assuming the role of law enforcement officers on the streets of the bankrupt country, with mounting evidence that Athenians are being openly directed by police to seek help from the neo-Nazi group, analysts, activists and lawyers say.Golden Dawn is now the third most popular political party in Greece, it is violently suppressing free speech, and the Greek Prime Minister Antonis Samaris, openly invoked the Weimar Republic while warning that Greek democracy is danger. But the Greek government is itself being criticized for its attacks on the free press.
In return, a growing number of Greek crime victims have come to see the party, whose symbol bears an uncanny resemblance to the swastika, as a "protector".
- Portugal's conservative government continues to pursue an austerity agenda, which is expected to result in a third consecutive year of recession, and is sparking mass protests.
- Spain is suffering from record unemployment of over 25 percent, and its conservative government is in denial over the recent IMF forecast that its economy will shrink twice as much next year as had previously been expected. The only unknown at this point is when or whether Spain will request a bailout. Typically, Mitt Romney recently offended the Spanish by saying he doesn't want the U.S. economy to follow its path, even as the conservative economic agenda would do exactly that.
- Ireland was the first European country to seek a bailout, but austerity continues to undermine any recovery, the unemployment rate remains just barely under the record that was set in June, and in just the past year over 87,000 Irish have emigrated.
- Italy has its highest unemployment in 13 years, as its recession also is twice as deep as was anticipated. Even perpetual conservative leader Silvio Berlusconi is now blaming austerity.
- In Holland, even though an austerity backlash brought down its government earlier this year, a new coalition government intends more of the same. With unemployment steadily rising and a possible debt crisis looming, the economic powerhouse faces an increasingly uncertain future.
- The economic disaster caused by French austerity brought down its conservative government, but new Socialist President Francois Hollande has no easy solutions, and remains hamstrung by the intransigence of Germany's conservative Chancellor Angela Merkel. Meanwhile, the French people continue to suffer as no clear growth strategy has been implemented.
- In Germany, that Merkel intransigence may finally be put to the test, as unemployment has doubled expectations, less than a year out from national elections. A group of leading German think tanks recently warned that the German economy will grow next year at only half the rate of previous estimates, and may be headed for a recession.
- The austerity program imposed by Britain's conservative Cameron government wrought a double-dip recession that was even worse than had been predicted, marking the deepest British recession since the 1950s. Cameron's Tories suffered devastating losses in the May council elections, and its coalition partner Liberal Democrats is now only Britain's fourth most popular political party, falling below the fringe anti-immigrant, anti-environment, anti-science, anti-tax UK Independence Party, which has never won a single seat in the House of Commons. In October, Britain finally emerged from the recession, and while the relentlessly mendacious Cameron wants to take credit, the Office of National Statistics told a different story:
However, the ONS pointed out that GDP growth – the strongest rate since the third quarter of 2007 – had been artificially boosted by two short-term factors: the Olympic Games, which fell in July and August, and the bounce-back from June's extra bank holiday for the Queen's diamond jubilee.And unless Cameron can manage to host an Olympics every quarter, the outlook looks less bright.
Chris Williamson, of the data provider Markit, said: "The government will most likely make the most out of this good news, but unfortunately it is unlikely that the UK will see such a strong performance again for some time. In reality, the danger is that this figure fuels a misguided belief that the economy is on the mend, when in fact there is plenty of evidence to suggest that momentum is being lost again."
He added: "There is a real risk that a return to contraction might be seen again in the fourth quarter." Treasury officials conceded that the strong 1% growth rate was unlikely to be repeated in future quarters.
- Not mentioned in my April post, Lithuania also has been suffering under austerity, and last week saw the predictable electoral consequences:
Lithuanians angry at spending cuts put left-wing opposition parties on the path to power in an election on Sunday that likely spelled the end for a conservative government praised abroad as a model of austerity.
The Social Democratic Party and the Labour Party, which have promised to raise the minimum wage and shift the tax burden to the better off, were headed for a parliamentary majority in combination with their likely partner, the Paksas Party, according to preliminary results from the second-round vote.
The Homeland Union of conservative Prime Minister Andrius Kubilius, who slashed the budget deficit at the cost of falling wages and rising unemployment, was set to be the second biggest party in parliament but with little chance of a coalition deal.
The record is clear. The economic agenda that Mitt Romney would impose has been tried throughout Europe, and the result has been economic and political turmoil, tremendous human suffering, and a rise in political extremism. The United States under President Obama has suffered from the overall stagnation in the world economy, but has avoided a crisis similar to Europe's by pursuing a different economic path. Should Mitt Romney become president, the economic devastation we Americans see in Europe will come home. The choice is ours.