A Huge Deficit Reduction. So What?

Jared Bernstein argues that “there’s a time for deficit reduction. But I am as sure of anything in economic analysis that these last five years were not that time.”

“And think about this: What did the deficit cutters gain? Did this sharp pivot to fiscal austerity help boost the recovery? To the contrary, it created well-documented fiscal drag that shaved 1.5 percentage points off of last year’s GDP growth, worth more than 1 million jobs. It is one of the main reasons our more-than-five-year-old economic recovery is still not reaching nearly enough people.”

“Did it boost the political standing of Democrats, including the president, who bought into the extremely wrongheaded idea that at times like this, the federal government has to tighten its belt, just like any other family? (In fact, the opposite is true.) Again, not at all. Find me one poll that shows this sharp deficit reduction helped the president’s approval ratings.”

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