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!
Note: the Euro Area (Eurozone) refers to a monetary union among the European Union member states that have adopted the euro as their sole official currency. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta the Netherlands, Portugal, Slovakia, Slovenia and Spain. 

The current period of economic distress is a time for investment, not a time for austerity. The President recognizes that in the future, many entitlement programs will have to be modified in order to limit long-term Federal debt. But the President strongly believes that now is not the time for austerity in programs of unemployment insurance, social security, Medicare and Medicaid. 

Obama’s position on economic policy contrasts with that advocated by Mitt Romney and the Republicans. Romney and the GOP, led by Congressman Paul Ryan, advocate severe slashes in Social Security, Medicare, Medicaid, and support for the unemployed and poor. It was precisely the policies of the previous Republican administration that produced the current economic debacle and distress. Low taxation on the wealthy as “job creators,” little government regulation of Wall Street and the banking industry, two unfunded wars, and the unfunded drug plan for seniors all ran up the deficit, and allowed bankers to make risky investments which jeopardized the economy. Romney and the GOP advocate retaining low taxation on the wealthy and low regulation of banking. America simply cannot afford Mitt Romney and the Republicans to finish off the massacre of the middle class and of our economy that they initiated.

The country also cannot afford to follow the austerity policies proposed by Ryan and endorsed by Romney. The lower, or even negative, growth of European countries is attributed by many economists as the direct result of the austerity measures imposed by their governments.

Among the many reasons to re-elect Barack Obama as President of the United States is his sensible stewardship of the economy. Although almost no one is satisfied with the economic conditions of this period, our country would be in far worse shape if we had followed former GOP policies, current GOP economic plans, or the kind of draconian economic programs followed in Europe, and proposed by the Republican Party, Paul Ryan, and Mitt Romney.

The rational majority does not mean to indulge in scare tactics to get out the truth, but when one looks at the facts regarding the fiscal challenges this country faces in the next 4 years, and when the Republican economic agenda is rationally examined, it is just plain scary.