Responding to a letter by 80 CEOs published in the Wall Street Journal calling for budget cuts to reduce the deficit, 350 economists published a letter calling for job stimulus and growth instead. CEOs Wrong To Promote Dangerous Budget Cuts, 350 Economists Say. These economist warn that cutting government spending during a downturn is the opposite of what should be done, pointing to examples such as the economy of Greece which collapsed immediately after deep austerity cuts which made unemployment worse. Instead we should be focusing on boosting employment.
On Wednesday, 350 economists signed a letter calling for "jobs and growth, not austerity." The letter, written by Robert Borosage and Roger Hickey, co-directors of the Institute for America's Future, and Robert Kuttner, founder of The American Prospect, emphasizes that mitigating long-term unemployment is the key to ensuring higher economic growth, lower unemployment and lower deficits.
"The budget hawks have the sequence backwards.... Budget cuts in a deep slump lead only to a deeper slump," the economists said. "We need jobs first. With recovery, deficit reduction will come of its own accord thanks to increased revenues in an improving economy." ...
The U.S. unemployment rate has been declining slowly, and it's generally recognized that it would be much lower now if it were not for government budget cuts. The unemployment rate, at 7.9 percent, is only 21 percent lower than its recession peak of 10.0 percent three years ago, according to the Bureau of Labor Statistics.
Austerity measures do not have a good track record as of late. As Greece has slashed its budget in exchange for bailout funding, its economy has collapsed, and its deficit continues to grow. In other countries in Europe, austerity measures also have led to high unemployment and higher deficits.
Here is the letter and all the names of the 350 economist who signed it.
Here we see yet more support for the idea that we should not make excess compromises to meet the Republicans at their "half-way" point under their false threats that unless we slash social spending we risk pushing the economy into a recession. Professional economists are suggesting that slashing government spending will exacerbate our economic difficulties. Paul Krugman, Richard Reich, Joseph Stiglitz and many other economists have been telling us this same message for years.
President Obama won this election by standing up as a champion of the middle class and has a mandate to insure the wealthiest pay their fair share of our tax burden to support vital government services. As our president noted in yesterday's news conference polls show more people support our approach to the budget asking the wealthiest to pay their fair share, and not cutting social spending than even voted for him.
Last week I reported a poll showing 70% of voters now support this approach. President Obama and our leadership need to remain strong in opposing Republican demands to cut Social Security, Medicare, government pensions, TriCare and other programs that would be affected by excessively drastic cuts. This includes the henky modified cost-of-living adjustment that will fool no recipients of Social Security, Medicare, or government pension -- this is a cut we need not accept. Democrats risk a blunder of a generation if we unnecessary succumb to Republican threats to walk off off "the fiscal cliff" to gain a "grand compromise."
This would be a case of the cure being worse than the disease. Remain firm Democrats. We can balance the budget with fair adjustment to tax policy, and return the enormous increases in total defense spending to Clinton era levels when we had surpluses.