Michael Hiltzik: Bailing out on the recovery
Today's lesson might be subtitled: How to guarantee a double dip.
The haste evinced by policymakers to end the process of economic stimulus before it has a chance to take root continues to amaze. As my Wednesday column reports, the strength of the recovery remains uncertain; while it's always perilous to write too much into daily stock market movements, Tuesday's sharp drop in equities suggests that investors are not convinced that the recovery will be strong or broad-based.
Yet the drumbeat to turn our attention to long-term concerns, specifically the fiscal deficit, over short-term recovery continues. Much of the thump-thump is purely manipulative: Consider the nationwide town halls sponsored last week by an organization called AmericaSpeaks. The event was funded in part by the investment banker Peter G. Peterson, who has been beating the deficit drum for years, including by sounding an entirely fatuous alarm about Social Security.
These public events need to be watched very cautiously, for they offer the veneer of representative opinion without the reality, as is argued in this paper by policy experts Benjamin Page and Lawrence Jacobs. (They're seconded by John Sides of George Washington University.)
The column starts below.
Seldom has the policy conflict between recovery and reform been presented as starkly as in the last two weeks.
On the one hand, there is last week’s congressional agreement on a historic reshaping of the financial regulatory system — which brings stronger consumer protections, sharper oversight of mega-banks and risk-oriented behavior, new constraints on mortgage terms and closer scrutiny of credit rating agencies and insurance companies.
On the other, there’s the failure of Congress (thanks to the threat of a Republican filibuster in the Senate) to extend unemployment coverage for more than 1 million Americans and to provide about $24 billion in Medicaid assistance for state budgets. That places as many as 900,000 public- and private-sector jobs, not to mention crucial services for destitute residents, at risk.
Not helping matters was the noise coming from last weekend’s G-20 summit of developed countries in Toronto about the need to cut fiscal deficits by 2013.
Plainly, while reform is beginning to move ahead, economic recovery is still very much at risk. The main threat comes from short-sighted policymakers who, despite an abundance of evidence that growth remains dependent on continued fiscal stimulus, have become unduly enamored of austerity instead.
Read the whole column.
-- Michael Hiltzik