Snap Fact #207
President Obama Advocates Growth over Austerity!
In the scary months that followed the 2008 fall of Lehman Brothers, just about all major world governments agreed that the sudden collapse of private spending had to be offset, so they turned to expansionary fiscal and monetary policy—spending more, taxing less, and printing lots of monetary base—in an effort to limit the damage. In so doing, they were following the advice of standard textbooks which were developed from the hard-earned lessons of the Great Depression.
The deficit-reduction program stipulated was to put people to work. Americans would prefer to cash paychecks and pay taxes than to collect unemployment insurance and rely on food stamps. When people go back to work, government revenues go up and expenditures go down. No measure will do more to reduce deficits.
President Barack Obama embraced this approach as his “exit strategy” from the severe economic recession. Consistently, over the course of his Presidency, he has advocated government investments in job creation, infrastructure repair, education, and partnerships with the private sector to grow new technologies and creative solutions. To be sure, the President believes in fiscal discipline and has led the country to the lowest increase in government spending of any President since Dwight Eisenhower, according to a recent article in the conservative Wall Street Journal.
In 2010: much of the world’s policy elite—the bankers and financial officials who define conventional wisdom—decided to throw out the textbooks and the lessons of history, and declare that down is up. That is, it quite suddenly became the fashion to call for spending cuts, tax hikes, and even higher interest rates even in the face of mass unemployment.
For the next two years most policy makers in Europe and many Republican politicians and pundits in America embraced a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the good common sense and past experience say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets. President Obama, however, continued with his "textbook exit strategy".
A 2012 comparison is shown below:
The Gross Domestic Product (GDP) in the Euro Area (the second largest economy after the U.S.) contracted 0.3 % in the fourth quarter of 2011 and is projected at -0.3 % in 2012. The GDP of the United States in the first quarter of 2012 increased at a 2.2% annualized rate… a stark contrast!