By Doug Cunningham
Conservatives are trying to convince us we need to cut the government budget deficit.
But economist Dean Baker, speaking on WBAI’s Building Bridges program, says that’s the opposite of what workers need. We need more government spending to create the economic demand that will put America back to work. And here’s why.
Baker: What we really need right now is more spending and that may sound scary or strange and strange to people and everything. But the story of the downturn is we lost a huge amount of demand from the private sector with the collapse of the housing bubble and its kind of straightforward.
We had this huge bubble - an $8 trillion housing bubble -that was supporting the economy, supporting huge amounts of construction every year, supporting consumption because people were spending based on the wealth they had, the equity they had in their homes.
That money is now gone. So we lost about $600 billion in annual construction demand, roughly the same amount - about $600 billion in consumption demand because people don’t have that wealth anymore. So we’re down $1.2 trillion in demand.
The government is the only sector of the economy that can make that up. So the idea we should be worried about the deficit right now, it’s just 180 degrees wrong.
We want the deficit. If you want to save money now, you want to throw people out of work. People may not understand that who say that, but that’s the reality.
Rightardia agrees. According to Keynesian economics, the government should increase spending and cut taxes during a severe economic downturn. Cutting government spending will simply extend the Great Bush recession.
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But economist Dean Baker, speaking on WBAI’s Building Bridges program, says that’s the opposite of what workers need. We need more government spending to create the economic demand that will put America back to work. And here’s why.
Baker: What we really need right now is more spending and that may sound scary or strange and strange to people and everything. But the story of the downturn is we lost a huge amount of demand from the private sector with the collapse of the housing bubble and its kind of straightforward.
We had this huge bubble - an $8 trillion housing bubble -that was supporting the economy, supporting huge amounts of construction every year, supporting consumption because people were spending based on the wealth they had, the equity they had in their homes.
That money is now gone. So we lost about $600 billion in annual construction demand, roughly the same amount - about $600 billion in consumption demand because people don’t have that wealth anymore. So we’re down $1.2 trillion in demand.
The government is the only sector of the economy that can make that up. So the idea we should be worried about the deficit right now, it’s just 180 degrees wrong.
We want the deficit. If you want to save money now, you want to throw people out of work. People may not understand that who say that, but that’s the reality.
Rightardia agrees. According to Keynesian economics, the government should increase spending and cut taxes during a severe economic downturn. Cutting government spending will simply extend the Great Bush recession.
Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA
Netcraft rank: 6603 http://toolbar.netcraft.com/site_report?url=http://rightardia.blogspot.com
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