While more than 80 high-profile CEOs penned a letter calling for significant budget cuts to reduce the nation’s deficit, hundreds of economists warn that this will only make things worse for Americans.
Economists claim that such austerity measures are “medieval medicine,” and will only make the economic crisis worse. Trying to reduce the deficit ignores the underlying problem of the recession: unemployment.
On Wednesday, 350 economists signed a letter in response to the CEOs austerity plan. The letter calls for “jobs and growth, not austerity.” Written by Robert Borosage and Roger Hickey, co-directors of the Institute for America’s Future, and Robert Kuttner, founder of The American Prospect, insists that creating long-term jobs is the only way out of our current economic crisis. They argue that using some of the government deficit to create more jobs is the only way to pull America up by its bootstraps, so to speak.
“The budget hawks have the sequence backwards…. Budget cuts in a deep slump lead only to a deeper slump,” maintain the economist group. “We need jobs first. With recovery, deficit reduction will come of its own accord thanks to increased revenues in an improving economy.”
The US unemployment rate has been steadily declining, and at 7.9 percent, is lower — albeit slightly — that the recession peak of 10 percent three years ago.
Economists have good reason to be wary of austerity measures. As Greece has slashed its budget instead of using bailout funding, its economy has collapsed and its deficit still continues to grow. Other European countries have met the same fate.
Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School, says that economic recovery “requires government action to spur the economy and encourage banks and corporations, which are sitting on massive sums of cash due to economic uncertainties, to free up those resources and create jobs.”
“The problem now is slow growth that has created the 7.9 percent unemployment rate,” Ghilarducci said. “Any austerity, any budget cuts will just make that worse.”
Economists argue that, at the polls this voting season, “voters agree joblessness and a bad economy are much higher priorities than deficits.”
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