Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


If the United States reduces spending and cuts its budget deficit, will that restore consumer confidence and help economic growth? Well, it’s worked before — in other countries, other eras, and under other circumstances than today’s. Bruce Bartlett summarizes the historical record:

Thus it turns out that fiscal contraction isn’t really expansionary except under conditions that do not exist today, and only when complimented by policies the U.S. is not free to pursue. Inflation and interest rates are at historically low levels and are not going to fall much lower even if the deficit disappears. As noted earlier, the Fed has limited capacity for further easing, and we can’t really depreciate our currency because it floats, nor is there any country to which we could realistically raise our exports to any great extent. Moreover, just about every other country is trying desperately to increase their exports to stimulate growth and all can’t do so simultaneously.

This is not an experiment that’s going to turn out well. Consumer spending isn’t going to rise while unemployment is high and wages are stagnant. (Former Jeopardy! champ James Pethokoukis on today’s employment news: “If workforce had not shrunk so dramatically, the unemployment rate would have risen to 9.9 percent. Yes, I did the math.”) Nor are consumers likely to draw down their savings or increase their borrowing. Just the opposite, in fact. And businesses aren’t going to increase investment as long as consumers are in the doldrums. All of this remains true regardless of the state of the deficit. So how exactly is fiscal austerity going to help the economy?

It’s possible, I suppose, that the economy will recover strongly and a few years from now we’ll all figure out the mechanism that made it happen. But I doubt it. We’re playing with fire here.

DONALD TRUMP & DEMOCRACY

Mother Jones was founded to do journalism differently. We stand for justice and democracy. We reject false equivalence. We go after stories others don’t. We’re a nonprofit newsroom, because the kind of truth-telling investigations we do doesn’t happen under corporate ownership.

And we need your support like never before, to fight back against the existential threats American democracy faces. Fundraising for nonprofit media is always a challenge, and we need all hands on deck right now. We have no cushion; we leave it all on the field.

It’s reader support that enables Mother Jones to report the facts that are too difficult, expensive, or inconvenient for other news outlets to uncover. Please help with a donation today if you can—even a few bucks will make a real difference. A monthly gift would be incredible.

payment methods

DONALD TRUMP & DEMOCRACY

Mother Jones was founded to do journalism differently. We stand for justice and democracy. We reject false equivalence. We go after stories others don’t. We’re a nonprofit newsroom, because the kind of truth-telling investigations we do doesn’t happen under corporate ownership.

And we need your support like never before, to fight back against the existential threats American democracy faces. Fundraising for nonprofit media is always a challenge, and we need all hands on deck right now. We have no cushion; we leave it all on the field.

It’s reader support that enables Mother Jones to report the facts that are too difficult, expensive, or inconvenient for other news outlets to uncover. Please help with a donation today if you can—even a few bucks will make a real difference. A monthly gift would be incredible.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate