The problem with the economy is not the deficit, or uncertainty, or high taxes on the wealthy. It's the 28 percent of U.S. households that have at least one person looking for a full-time job.
People aren't buying stuff because they don't have jobs and they don't have any money.
As the peerless Dean Baker said on a conference call this morning, "The story is demand."
Baker joined 299 other economists in signing a statement warning our political leaders,
"Today there is a grave danger that the still-fragile economic recovery will be undercut by austerity economics."
The economists tell us to remember our history:
In the Great Depression, Franklin Roosevelt’s New Deal generated growth and reduced the unemployment rate from 25 percent in 1932 to less than 10 percent in 1937. However, the deficit hawks of that era persuaded President Roosevelt to reverse course prematurely and move toward budget balance. The result was a severe recession that caused the economy to contract sharply and sent the unemployment rate soaring. Only the much larger wartime spending of the early 1940s produced a full recovery.
The economists want our political leaders in Washington to do three things:
- send aid to the states whose budget crises threaten recovery by forcing them to lay off school teachers, public safety workers, and other essential workers.
- invest in public service jobs
- invest in infrastructure projects for transportation, water, and energy conservation that will make our economy more productive for years to come.
Don't hold your breath, though.
