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Don’t Slash Government Spending. Increase It.

| December 1, 2013

Rated R. (Khalil Bendib)

Rated R. (Khalil Bendib)

By Richard Kirsch

With the Friday the 13th December deadline for a federal budget deal, the cries of “we’re broke,” and “we can’t afford to keep spending,” are ringing again. But we’re not broke and acting like we are is making us poorer.

One of the biggest common misunderstandings is that governments are like households, which need to tighten their spending when times are tough. Actually, governments and households work in opposite ways.

Governments can and should spend more when times are tough. Government spending makes up for lack of spending by families and businesses, and it helps get the economy moving by getting people back to work, putting money in their pockets, and contracting with businesses.

If we needed a reminder of that, the recent government shutdown gave us one. Journalists reported story after story about how business was down, as federal workers were laid off and national parks closed. The estimates are that even though the shut down only lasted 16 days, it cost the economy $24 billion.

We need government spending and investment to get the entire economy moving forward. When families are back at work with decent wages, government tax revenues will rise and spending on social supports will fall. That’s when government can reduce spending without slowing down the economy.

During the past two years we’ve reduced the deficit by half, close to 2008 levels. That may sound like it’s a good thing, but it’s really the biggest reason the economy is so lackluster for the vast majority of Americans with a near-record-high in unemployment, stagnant wages, and a smaller proportion of Americans working than any time in the past 30 years.

other-wordsWe’ve also cut all the wrong things: spending that puts money in people’s pockets today and investments in our economic future. We’ve cut spending on education, unemployment insurance, environmental protection, and scientific research. Our public investment, which includes annual government programs and spending on roads, bridges, transit, research, and development is actually the lowest it’s been as a share of the economy in 60 years.

What if we’d taken a different course during the recession? How about rather than cutting spending after an initial stimulus, which avoided a second great depression by saving three million jobs, the government had kept at it?

History shows that if we have continued the levels of spending normally done after recessions, we would have spent some $800 billion more than we did, and the overall economy (and not just the stock market) would be back to the same level today that it was before the recession hit.

In short, the argument that the government must live within its means to protect our children’s future is backwards. Averting deficit spending now means starving our children’s present and their future. More parents will have to struggle to get by, fewer good jobs will be created, education will suffer, and today’s college students will stumble into their careers saddled with huge debt loads.

And our infrastructure will keep crumbling and research will dwindle, making it harder for our businesses to compete in the global marketplace.

There are ways we can reduce the deficit without slowing down the economy very much, if at all. That is by looking at the other truth about the cry that “we’re broke.” In fact, we have been robbed.

When Uncle Sam gives big corporations tax breaks to move jobs overseas, we’ve been robbed. When Washington taxes billionaires at a lower rate than their secretaries, we’ve been robbed.

To get the country moving again, Congress needs to reverse direction and increase spending on vital services and investment.

That means reversing the budget cuts on domestic spending already in place and stopping any more sequestration cuts on vital services for our families. And raising taxes on the wealthy and huge corporations, which have been gaming the system at our expense.

Instead of obsessing about the “need” to cut government spending, our leaders should be figuring out how best to stimulate the economy to provide both a better today and future for our children.

Richard Kirsch is a senior fellow at the Roosevelt Institute and the author of Fighting for Our Health: The Epic Battle to Make Health Care a Right in the United States. He’s also a senior adviser to USAction

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17 Responses for “Don’t Slash Government Spending. Increase It.”

  1. Frank Diliberto says:

    Please! I hope the readers do not fall for this story.

  2. Anonymous says:

    I’ve always been amazed by the number of people who cry about how we should be slashing spending if we are to stave off imminent ruin and how those same individuals are living quite well-off lifestyles themselves. The majority of them don’t seem to have a problem spending when it comes to their own selves…And that includes those receiving Social Security and Medicare who grumble endlessly about how the increases in their benefits are never generous enough. It also makes me smile (ruefully) and shake my head when I hear older women, in particular, who are receiving SS benefits and Medicare who have never worked outside the home (and, therefore, have never contributed any actual money into the system) complain about those thousands of “money-sucking welfare queens” who are bleeding our country dry. Nobody DESERVES to live in poverty or die from want.

  3. m&m says:

    The people who support this are liberals, deadbeats, people who never worked a day in their lives and those that expect country to pay for everything..

  4. Freddy says:

    Palm Coast city council has no problems subscribing to this philosophy. Spend 9 million of taxpayers’s money on a new Taj Mahal.

  5. Diana L says:

    Wow. I think there is a lot of validity in this way of thinking and I assure you I am not a deadbeat and I have worked a few days in my life. Being born on a farm, I was in the garden at a young age and in the fields when I was young enough to drive the tractor, had a job at an amusement park at 13 and worked every weekend, then checked groceries when I was old enough to do that. My rest of my life, I worked at least one job, many working 40-70 hours a week and at times worked 2 jobs. I don’t think it is respectful nor productive to call people deadbeats just because they subscribe to a different way of thinking than you do.

  6. orphan says:

    Rand Paul wrote a book titled “Government Bullies”. Please read it. I’m saying this to every American who cares about our country. One of his MAIN points is that we should STOP all of this foreign aid! We do NOT have the money! It’s not there! Smoke and mirrors or whatever else the liberals can come up with has cast US into the *poor house* as far as the world is concerned. That is sick!
    Kirsch wants you to believe that spending MORE is going to be good for us. That is sick!
    Our government has in my lifetime created a citizenry which expects more and more from it. That is sick! (and I’m not in any way including national defense).
    The main reason so many Americans are using and abusing our welfare system (I’m including Medicare, Medicaid, food stamps, college loans ad nauseam), is that OUR government has constantly and continually promoted these ‘freebies’! THEY’RE NOT FREE! GET IT? I have said before that I witness fraud on a regular basis, and most of it is from reading/watching a news source.
    The only way for OUR country to get back on it’s financial feet is to stop funding programs that don’t work! And if this means that you or your neighbor has to rely a little more on being self -sufficient rather than continue to receive benefits, tough. Get used to that, because that is what is coming down the pike.

  7. Outsider says:

    One major part of the equation is left out: when the government runs a surplus, it needs to bank that money for a rainy day. Well, we all know that never happens, and we have 17 trillion in debt and counting. The author ignores the fact that it’s Obama’s policies that are making businesses and individuals reluctant to spend. Also, they keep printing more money with the supposed idea that there is a shortage of money when in fact the money supply has more than tripled since 2008 and excess bank reserves have gone up 20 fold. There is plenty of liquidity, there is just no equivalent desire to spend, primarily because of the doubt created by this president. His policies are the biggest drag on the economy, not a lack of money or governemnt spending.

    • A.S.F. says:

      @Outsider says–…Which is why the stock market has continued to improve, jobs numbers are beginning to rise (albeit more slowly than we would like), the housing market has begun to pick up again after the near ruin caused by Republicans when they were at the helm. Obama had to clean up that mess. I guess he’s not doing it fast enough for you. Or, the numbers have to be cooked. Or, any one of a million fantastical fabrications that you can come up with to defame a President who has been freely elected, twice over, The reason the Republicans keep losing the faith of the majority of Americans is their own fault, not Obama”s or the Democrat’s. To the detriment of their own party, they just don’t seem to get it. What a shame.

  8. Genie says:

    I think the problem here is that we need a Fair or Flat tax so that ALL in this country pay their fair share. That would increase revenue and eliminate a major portion of the IRS.

  9. tom jack says:

    Yes Lets tax the rich more as the top 1% only paid 38% of income taxes, and earned 18% of income while the bottom 50% paid nothing. Also lets keep comparing a secretaries income tax rate from her salary with her boss who only pays capital gains taxes as he does not draw a salary. (yes I am talking about Warren Buffet). Lets keep piling debt upon debt on our children and grandchildren after all its our right to spend them into oblivion isn’t it? Only someone who doesn’t understand economics believes this drivel.

  10. Diana L says:

    Partisan attacks get us no where. I believe this problem has been 30 plus years in the making. There is plenty of blame to go around. The problem is, we are so busy throwing arrows, vilifying each other and we think Our way is the only way. WE ARE BETTER TOGETHER because in reality no one party/person has the answer.

  11. Zealot says:

    Good article. There is not logic in cutting spending. It’s simple math. If every person in this county paid an extra $50.00 in taxes a year (highly unlikely anyone would even notice that) with only 25,000 households taxed that would be an extra $1.25 million tax dollars. To put it another way that is 25 $50,000/ year public service jobs. Now I know conservatives hate the thought of public service but that is 25 more people who get mortgages, buy groceries, furniture, finance cars and pay utilities. The economy would be a lot stronger with increased spending. History has shown it as well. Government spending projects like the Hoover dam helped ease the depression and the economy took an immediate down turn when George W. Bush started his first term and immediately cut taxes. It’s also interesting to note how against government spending the Republican party is now. They complain that Liberals have increased the national debt but Bush doubled the national debt in 8 years by cutting taxes and increasing spending (money spent over seas rebuilding Iraq). And it’s funny to note that ultra conservatives call themselves Ronald Reagan republicans. They obviously have no idea what Reagan stood for because he tripled the national debt during his presidency by increasing government spending on the military industrial complex and signed the largest tax increase in history and the economy was strong because of it. If people would just educate themselves on simple economics they would understand the issue better. All people seem to think is that increasing taxes and government spending hurts their pocket books. It is actually the opposite. There is no doubt that there is government waste though but it comes at the top with exorbitant pensions for elected officials.

  12. Schottey says:

    Conservatives love to point and shout, “Look at Europe! Look at Greece! That will happen to us!” Yet, they fail to realize that Greece went under, as well as Spain and other regions, because of austerity—the government responded to debt by slashing spending and sent those economies into depressions. Just like the U.S. did in the 1930s before the war/shared burden/increased production and (yes) increased taxes (to pay for the war) pulled us out of it.

    • A.S.F. says:

      @Schottley says–Oh, don’t you know that there is nothing to learn from reality or history, as long as we have Rush Limbaugh, Ted Cruz, Sarah Palin and FOX news to tell us differently? After all, God speaks directly to, and through, them !

  13. Liana G says:

    If the government had bailed out the common tax paying homeowners and small businesses who suffered as a result of Wall Street greed, maybe the economy would have turned around by now. Instead, the government refuse to help these folks by choosing to ignore their plight, and chose to bail out Wall Street at the very expense of these common tax paying folks. On top of that, the government went into overdrive printing money like no tomorrow to buy up all the toxic derivatives that Wall Street peddled and still continues to peddle. And who is going to be paying for these corrupt shenanigans? The ordinary taxpayers, again. Government may need to spend more to improve the economy but the ordinary taxpayers are in no position,financially, to take on this burdensome expense. They’re broke. The government needs to go peddle its tax and spend elsewhere.

  14. Diana L says:

    Okay, let’s talk about Wall Street greed, happened because there was lack of proper regulation. AND we have learned nothing as there is still a lack of regulation. That is the insane part of this.

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