No Doubt Left - Fiscal Spending Still Needed

To belabor a point made previously on this blog - deficit hawks are jeopardizing not only the nascent economic recovery but the economic prospects of young people. Don’t take my word for it. There’s a growing chorus of journalists and political commentators across the political spectrum weighing in on the deficit hysteria consuming Washington.

The NYTimes runs a piece today aptly titled “American Dream is Elusive for a New Generation ”. The article profiles the travails of a 24 year old recent college grad struggling to find desirable work and living back at home with his parents.

As the passage below highlights, young people attempting to navigate their way into and through this job market are facing historic headwinds.What's striking is that young people display a persistent sense of optimism, a belief that better days are ahead. But that unrelenting optimism may change in the future, and it depends on what type of economic recovery takes place. The story 30, 40 or even 50 years from now may be that of a generation whose economic possibilities were constrained by this Great Recession.

“I don’t think I fully understood the severity of the situation I had graduated into,” he said, speaking in effect for an age group — the so-called millennials, 18 to 29 — whose unemployment rate of nearly 14 percent approaches the levels of that group in the Great Depression. And then he veered into the optimism that, polls show, is persistently, perhaps perversely, characteristic of millennials today. “I am absolutely certain that my job hunt will eventually pay off,” he said.

For young adults, the prospects in the workplace, even for the college-educated, have rarely been so bleak. Apart from the 14 percent who are unemployed and seeking work, as Scott Nicholson is, 23 percent are not even seeking a job, according to data from the Bureau of Labor Statistics. The total, 37 percent, is the highest in more than three decades and a rate reminiscent of the 1930s.

Calls for increased government spending have for the most part been articulated from the left. Yet it appears that the dismal job numbers last month have caused some conservative deficit hawks to recognize the value in additional fiscal spending. Economist Mom runs this snippet taken from an open letter to Scott Brown in the Boston Globe

…take it from David Walker, former US comptroller general and now, as president of the Peter G. Peterson Foundation, a leading deficit hawk. “While the current deficits are large, they don’t represent the real threat to the future of the country,’’ he said. “The real threat is the medium-to-longer term structural deficits that will be here after the economy has recovered.’’…

No fiscal falcon with a proper balance of economic and fiscal priorities is going to fault you for supporting that extended aid.
“As a deficit hawk, I wouldn’t worry about extending unemployment benefits,’’ said Bob Bixby, president of the Concord Coalition. “It is not going to add to the long-term structural deficit, and it does address a serious need. I just feel like unemployment benefits wandered onto the wrong street corner at the wrong time, and now they are getting mugged.’’

And here, Matt Mills a traditional deficit hawk makes an argument for increased fiscal spending via The Washington Post

I come before you, in other words, a deficit hawk to the core. But it is the height of economic folly -- and socially dangerous, in my view -- to elevate deficit reduction as a goal today over boosting jobs and growth. Especially when there are ways to goose the economy while at the same time legislating changes that move us toward fiscal sanity once we're past this stagnation.

Even NYTimes columnist David Brooks tepidly endorses extending unemployment benefits in his most recent column, albeit while making an argument against a second stimulus.

It goes without saying but deficits and the debt matter. Yet the additional measures in spending that most are now advocating for have no serious bearing on our real long-term budget problems.

These are not arguments made in the abstract, the Senate’s failure to extend unemployment benefits have real human tragedies behind them (calls into the National Suicide hotline have increased). States will be forced to lay off hundreds of thousands of employees if Congress doesn’t extend additional aid.

What will Congress or more specifically the Senate do once it returns from its holiday recess? Only time will tell. We can only hope that the convergence across the political spectrum for additional fiscal spending outside of the halls of Congress informs the action within it.