18 June 2011

Making Explicit What Republican Candidates Advocate

Let's get clear on what Republican candidates are advocating.

Right now - largely because of recovery from the Great Recession - the federal government has a deficit of $1.5 trillion.

US total GDP is about $15 trillion.

Republican candidates refuse to raise taxes but insist on lowering the deficit to zero. That is, they want to pull out $1.5 trillion of a $15 trillion economy.

Essentially, they are advocating that we eliminate 10% of the economy - mostly government and government contractor jobs. Even disallowing the ripple effect of this (think of all the "private sector" businesses near air or naval bases that would go under after such layoffs), such an action would more than double an unemployment rate that is already too high.

I do believe that we face a new set of problems that will require Obama to be as creative for this time as FDR was for his. His solutions to date has been expensive but timid, in the sense that it offers too little that could be called innovative. His solution has been timid but the Republican's solution is simply terrible.

Post Script: David Stockman - one of Ronald Reagan's chief advisers - admitted that their austerity plan to reduce the deficit will make the job market worse, probably resulting in a decade of double-digit unemployment. Read it here at Jonathon Cohn's column. 

No comments: