Welcome back, Ian. – promoted by Rosi
New Jersey Governor Chris Christie’s lack of understanding of economics appears to approach the level of John McCain.
Christie, like many Republicans, claims to believe in fiscal responsibility, and says that government shouldn’t spend more than it has, just like real families. (I’d like to meet these families). The problem is, these ideas don’t work for families and they don’t work for our government.
On Meet The Press this past Sunday, Christie said,
I mean, we made real hard decisions, and I cut some programs that we would’ve liked to have kept…But we’re broke. We don’t have the money anymore.
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So, Governor, I guess that means your family would never, say take out a mortgage? Or borrow money to send your kids to college? Oh, but that’s different, you say? How? Seriously. How is that not spending more than you have? Of course you’d do those things because that borrowing and spending brings more benefits in the long run that not doing so. So let’s get past the false ideology.
Next, let’s talk about economics in a recession. In the same interview as he brags about cutting spending, he also says that we shouldn’t raise taxes on income above $250,000 in a “weakening economy.” When David Gregory asked about the budget, Christie fought with him about whether a tax cut was actually a tax cut but never answered the question how he’d offset the revenue lost.
According to Christie, the budget matters so we have to cut government spending that directly creates jobs, but the economy matters so we have to keep income tax rates on the richest low. Huh? The problem is that doing so won’t create jobs, according to most economists, including former Vice-Chairman of the Fed, Alan Blinder .
“Some have a lot of bang for the buck, and some have very little. The GDP increase per dollar of budgetary cost is in the range of 1.6, 1.7 for things like food stamps and unemployment benefits, and in the range of .35 for extending the Bush tax cuts. We could get some substantial job creation by simply reprogramming the $75 billion that would be saved over the next two years by not extending the upper-bracket Bush tax cuts and spending it instead on unemployment benefits, food stamps, and the like.”
The reality is that when private sector demand is weak, the government can prime the pump. This increases demand for the things companies sell, leading them to hire more workers to make more products to meet the demand. That hiring creates more demand, as workers spend money, and it creates a virtuous cycle. My only training in economics is reading Paul Krugman, but he explained this pretty well. It is almost so simple that it’s amazing anyone doesn’t understand it.
By contrast, cutting government spending, which Blinder shows is effective in creating jobs, in favor of tax cuts for the rich, which is not, is simply a bad idea. It doesn’t work. Yes, when times are flush, government spending can crowd out private spending. Yes, when times are flush we should run a surplus and cut some spending to save it for when we need it. That’s what Bill Clinton and the Democrats (without a single Republican vote in the House or Senate) did in the 1993 budget plan. And it led to “surpluses as far as the eye can see” by 2000.
But Christie doesn’t get it. Not spending now will only make the government poorer by keeping revenues down, and the long term cost, both human and economic are even worse. Christie embodies Republican thinking on the economy, and that’s why his ideas need to be exposed for what they are.