Monday, November 08, 2010

Spend More? Spend Less? 

The new Republican governors and the new Republican House majority are devising ways to spend less money in order to cut the budget deficit.  Democrats are pushing to spend more in order to create jobs.  Who is right?  One could put two economists in a room and stand back to watch a cat fight.  Although spending more alleviated the Depression in the 1930s, there is no clear evidence with multi-trillion deficits that the same stimulus would work today.  Hence, the opposed views are deadlocked in a fight for the public's support.  It is one of the most important public relations battles occurring today yet few think of it that way.  And, it is a battle that will occur over the next two years with each side making a case for its point of view, sometimes rationally and sometimes ad hominem.  What both sides appear to be missing is that the public doesn't much care.  People want to work again, to pay their bills and to return to a semblance of a normal life.  They will favor deficit cutting if it creates jobs or government-created jobs as long as they can work.  So, the key to the argument for both sides is to make clear how their points of view create jobs today without delay.  That is hard to do.  Deficit cutting doesn't create immediate work nor does government spending, as the President learned with his stimulus bill.  This is an argument that will be interesting to watch.  Both parties might get punished in 2012 if the economy doesn't turn around.


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