Fiscal austerity in the wake of the Great Recession--imposed by Republicans on the federal, state, and local levels--is responsible for the sluggish pace of economic recovery since 2009, states a new paper that undercuts conservative attempts to pin the blame on President Barack Obama.
"By far the biggest drag on growth throughout the recovery from the Great Recession has been the fiscal policy forced upon us by Republican lawmakers in Congress and austerity-minded state legislatures and governors," wrote Josh Bivens of the Economic Policy Institute (EPI), which put out the analysis on Thursday.
Because the "ability of conventional monetary policy to spur recovery following the Great Recession was more limited than in any other post-war recovery," Bivens explained, increases in government spending and federal aid to states were necessary to help working Americans following the recession that began in December 2007 and ended in June 2009.
"Had the Obama administration made such a powerful case for why austerity was hampering growth, it could have educated the public and potentially helped build support for more sensible policy the next time the United States faces a recession."
--Josh Bivens, Economic Policy Institute
"Given the degree of damage inflicted by the Great Recession and the restricted ability of monetary policy to aid recovery, historically expansionary fiscal policy was required to return the U.S. economy to full health," said Bivens, who is EPI's research and policy director. "But this government spending not only failed to rise fast enough to spur a rapid recovery, it outright contracted, and this policy choice fully explains why the economy is only partially recovered from the Great Recession a full seven years after its official end."
From GOP spending cuts to the refusal of states to accept "free fiscal stimulus from the Medicaid expansion under the Affordable Care Act," Republican lawmakers "have embraced and enforced fiscal austerity, and the result has been the most discouraging recovery on record," he said.
As the Guardian notes , "[t]he report comes as the Republican party once again calls for the reining in of government spending and reductions in the deficit."
But, while it's clear that "Republicans remain steadfast in their opposition to government spending--even for government jobs like teaching, firefighting, and emergency management," Campaign for America's Future blogger Richard Eskow notes that "a lot of Democrats have bought into the myth, too."
Indeed, he wrote on Friday, "[t]here are strong hints of austerity-oriented thinking in Hillary Clinton's rhetoric," and
Austerity thinking was highlighted at last month's Democratic National Convention when Gene Sperling, a senior economic advisor to former presidents Clinton and Obama, was featured in a humor-oriented anti-Trump video produced by "Funny or Die." Whether or not hilarity ensues must remain a matter of personal opinion, but the video clearly relies on austerity economics--specifically, an exaggerated fear of deficits--to scare viewers.
Even Obama, Bivens argues in the EPI paper, "could have made a louder and more consistent case that the slow recovery had concrete, identifiable roots in decisions made by Congress."
"Had the Obama administration made such a powerful case for why austerity was hampering growth," Bivens said, "it could have educated the public and potentially helped build support for more sensible policy the next time the United States faces a recession."
Democrats have not directly challenged Republicans on government's proper role in the economy. Too often, they have tried to co-opt the rhetoric (and sometimes the policies) of austerity instead.
Republicans, on the other hand, offer a clearly articulated and internally coherent (if utterly fallacious) economic perspective. Democrats can also offer a coherent perspective, too--one with the added advantage of having been proven by experience. That perspective can make life better for millions of people.
"This is the economic debate this country needs," he said. "But we won't get it until someone challenges austerity economics and the conservative philosophy behind it--directly, unambiguously, and fearlessly."