Bill Gross, co-founder of investment management giant PIMCO, has a strong message for Congress and particularly deficit peacocks: stop obsessing over the deficit and create some jobs
. Gross makes his argument in a prospectus for clients.
What the country needs, Gross said, is real stimulus now, and a measured return toward fiscal balance in the years ahead.
"Solutions from policymakers on the right or left, however, seem focused almost exclusively on rectifying or reducing our budget deficit as a panacea," Gross writes. "While Democrats favor tax increases and mild adjustments to entitlements, Republicans pound the table for trillions of dollars of spending cuts and an axing of Obamacare. Both, however, somewhat mystifyingly, believe that balancing the budget will magically produce 20 million jobs over the next 10 years. President Obama's long-term budget makes just such a claim and Republican alternatives go many steps further. Former Governor Pawlenty of Minnesota might be the Republicans' extreme example, but his claim of 5% real growth based on tax cuts and entitlement reductions comes out of left field or perhaps the field of dreams. The United States has not had a sustained period of 5% real growth for nearly 60 years."
"Both parties, in fact, are moving to anti-Keynesian policy orientations, which deny additional stimulus and make rather awkward and unsubstantiated claims that if you balance the budget, 'they will come.' It is envisioned that corporations or investors will somehow overnight be attracted to the revived competitiveness of the U.S. labor market: Politicians feel that fiscal conservatism equates to job growth. It's difficult to believe, however, that an American-based corporation, with profits as its primary focus, can somehow be wooed back to American soil with a feeble and historically unjustified assurance that Social Security will be now secure or that medical care inflation will disinflate. Admittedly, those are long-term requirements for a stable and healthy economy, but fiscal balance alone will not likely produce 20 million jobs over the next decade. The move towards it, in fact, if implemented too quickly, could stultify economic growth. Fed Chairman Bernanke has said as much, suggesting the urgency of a congressional medium-term plan to reduce the deficit but that immediate cuts are self-defeating if they were to undercut the still-fragile economy." [emphasis TPM's]
The wisdom of that is damned hard to deny for anyone living in a reality-based world. Unfortunately, Washington D.C. seems to be located in an alternate universe on this one. Republicans are intent on keeping the economy weak in hopes that it will lead to electoral victory, and Dems are inexplicably allowing them to do it. Maybe since the message now is coming from the non-DFH world, and in fact the world of high finance, somebody with the power to do something about it will start listening.