350 Economists Call On Congress To Invest In Job Growth Instead Of Austerity

By Travis Waldron on Nov 14, 2012 at 3:30 pm

America’s fledgling economic recovery is being threatened by “obsessive concern with cutting deficits that has infected both parties,” a group of 350 economists wrote in a letter to lawmakers this week. Instead of focusing on deficit-reducing austerity measures that will do nothing to fix the “mass unemployment, rising poverty, and declining wages” that are holding back the recovery, Congress should focus on public investments that will boost job and economic growth, the letter states:

Yet too many in Washington are fixated on cutting public spending to balance the budget, not on how to put people back to work and get our economy going. There is no theory of economics that explains how we can deflate our way to recovery. Businesses are not basing investment decisions on how much Congress cuts the debt in 2023. As Great Britain, Ireland, Spain and Greece have shown, inflicting austerity on a weak economy leads to deeper recession, rising unemployment and increasing misery. [...]

The budget hawks have the sequence backwards. Public outlay for jobs and recovery come first, growth is restored, and revenues follow. Budget cuts in a deep slump lead only to a deeper slump.

Austerity measures have plagued Europe in recent years, and the so-called “fiscal cliff” — the spending cuts of tax increases that could take place at the end of the year — would implement an even larger austerity package than European countries have implemented. The economists called for a different approach, telling lawmakers to invest in the nation’s faltering infrastructure, to reverse the decline in public sector jobs, and to increase the affordability of higher education. 

President Obama proposed a package that would have accomplished many of those goals in 2011. The American Jobs Act would have invested in infrastructure and provided aid to states to prevent layoffs of teachers, firefighters, and police officers, and it would have both boosted economic growth and created roughly one million jobs, according to economic estimates. Republicans blocked the bill from passage in both the Senate and the House of Representatives.

To pay for such investments, the economists suggested a solution that has been anathema to Washington lawmakers: borrowing money at historically-low interest rates available to the government right now. Congress, the economists said, should also “stimulate recovery without increasing deficits by increasing taxes on the wealthy and pumping the proceeds directly into the economy.”

Jobs and Growth, Not Austerity

The U.S. economy, once in free-fall toward a new depression, has begun to recover. But we are still mired in a prolonged slump marked by mass unemployment, rising poverty, and declining wages. And the fragile recovery is threatened by obsessive concern with cutting deficits that has infected both parties.

As even Federal Reserve Chairman Ben Bernanke recognizes, it is long term unemployment, not excessive deficits or debt, that is now inflicting the greatest human toll and economic damage. Polls show that voters agree joblessness and a bad economy are much higher priorities than deficits.

Yet too many in Washington are fixated on cutting public spending to balance the budget, not on how to put people back to work and get our economy going. There is no theory of economics that explains how we can deflate our way to recovery. Businesses are not basing investment decisions on how much Congress cuts the debt in 2023. As Great Britain, Ireland, Spain and Greece have shown, inflicting austerity on a weak economy leads to deeper recession, rising unemployment and increasing misery.

In a deep recession, deficit reduction is a moving target. If you cut spending and consumer purchasing power in an already depressed economy, unemployment rises and revenues fall — and the goal of a smaller deficit keeps receding like a mirage in a desert. When private purchasing power is depressed by the aftermath of a financial collapse, only public investment can make up the gap.

The budget hawks have the sequence backwards. Public outlay for jobs and recovery come first, growth is restored, and revenues follow. Budget cuts in a deep slump lead only to a deeper slump.

The government should invest in areas vital to our economy — to repair crumbling infrastructure, to build 21st-century smart-grid, public transportation and renewable energy systems, and to create public and private sector jobs. We should also help states prevent layoffs of teachers and other public servants, make early care and higher education more affordable, and create public service jobs throughout the nation. It can do so by borrowing at record low interest rates. We can also stimulate recovery without increasing deficits by increasing taxes on the wealthy and pumping the proceeds directly into the economy.

Both bipartisan and conservative deficit reduction plans — Simpson-Bowles, Rivlin-Domenici, and the Republican budget — magically assume a recovery to "normal" levels of employment. Yet, the economy is nowhere near normal growth, and budget cutting will only retard growth. At the end of the year, we face a congressionally-created "fiscal cliff," with automatic "sequestration" spending cuts everyone agrees should be stopped to prevent a double-dip recession. That threat has led to backroom negotiations, backed by a multimillion dollar public relations campaign, toward a "grand bargain" that would maintain tax give-aways for the rich; cut Social Security, Medicare, and Medicaid; and impose new, job-killing spending cuts. This is no bargain, and it should be rejected.

President Obama should be commended for proposing a new jobs program. But unless the balance of power in Congress changes dramatically, there is a serious danger that after the election the austerity lobby will prevail.

We need jobs first. With recovery, deficit reduction will come of its own accord thanks to increased revenues in an improving economy. That was the case in the three decades after World War II — when the debt to GDP ratio declined from over 120 percent of GDP in 1945 to under 30 percent by 1978.

In 1945, our leaders placed a priority on putting people to work, not cutting spending. So government doubled down with public investments like the GI bill, housing, and highways — and widespread collective bargaining and equal opportunity laws made sure the rewards of growth were widely shared. Today, we need the same scale of public investments that made sure the greatest generation and their children enjoyed growth, opportunity, and shared prosperity.

In the face of today's weak economy, the Federal Reserve has vowed to sustain extraordinary measures until unemployment comes down and the economy picks up. But as Chairman Ben Bernanke observed, very low interest rates alone cannot fix this economy. To make sure the American people are not crippled by another lost decade of joblessness, we need presidential leadership — and congressional action — to spur jobs and growth, not dangerous austerity.


Endorsed by the following economists:

Tanweer Akram
ING Investment Management
Randy Albelda
University of Massachusetts, Boston
Sylvia A Allegretto
University of California, Berkeley
Marcellus Andrews
Barnard College, Columbia University
Rania Antonopoulos
Levy Economics Institute
Richard Appelbaum
University of California, Santa Barbara
Michael Ash
University of Massachusetts Amherst
Nahid Aslanbeigui
Monmouth University
Philip Arestis
University of Cambridge
Glen Atkinson
University of Nevada, Reno
Marshall Auerback
Institute for New Economic Thinking, INET
Lee Badgett
University of Massachusetts, Amherst
Ron Baiman
Chicago Political Economy Group
Dean Baker
Center for Economic and Policy Research
Benjamin Balak
Rollins Colege
Radhika Balakrishnan
Rutgers University
Nesecan Balkan
Hamilton College
Nina Banks
Bucknell University
Stephen Bannister
University of Utah
William Barclay
Chicago Political Economy Group
Hillel Bachrach
20/20 HealthCare Partners
Lourdes Beneria
Cornell University
Peter Bohmer
The Evergreen State College
Clair Brown
UC Berkeley
Robert Buchele
Smith College
David Barkin
Unviersidad Autonoma Metropolitana
Chuck Barone
Dickinson College
Robin Bartlett
Denison University
Dale Belman
Michigan State University
Michael Belzer
Wayne State University
Marc Bendick, Jr.
Bendick and Egan Economic Consultants, Inc.
Lourdes Beneria
Cornell University
Chris Benner
University of California, Davis
Robert Berg
World Academy of Art and Science
Jared Bernstein
Former Economic Advisor to Vice President Joe Biden
Barbara Bergmann
American University and UMD
Gunseli Berik
University of Utah
Alexandra Bernasek
Colorado State University
Annette Bernhardt
National Employment Law Project
Cihan Bilginsoy
University of Utah
Cyrus Bina
University of Minnesota
John Bishop
Cornell University
Josh Bivens
Economic Policy Institute
William Black
University of Missouri, Kansas City
Gail Blattenberger
University of Utah
Robert Blecker
American University
Carrie Boden
Arlington Independent School District, AISD
Ted Boettner
West Virginia Center on Budget and Policy
Peter Bohmer
The Evergreen State College
James Boland
International Union of Bricklayers and Allied Craftworkers, IUBA
James Booker
Siena College
Robert Borosage
Institute for America's Future
Howard Botwinick
The State University of New York Cortland
Roger Even Bove
West Chester University (Retired)
James Boyce
University of Massachusetts, Amherst
Gerard Bradley
New Mexico Voices for Children
Elissa Braunstein
Colorado State University
Doug Brown
Democratic Socialists of America
Bruce Brunton
James Madison University
Robert Buchele
Smith College
Howard Bunsis
American Association of University Professors, AAUP
Mary Byrne
Salem State University
Marianne Callahan
Internation Association For Feminist Economics
Martha Campbell
The State University of New York, Potsdam
Jim Campen
University of Massachusetts, Boston
Timothy Canova
Nova Southeastern University Shepard Broad Law Center
Jim Carpenter
Milwaukee Area Technical College
Raymond Castro
New Jersey Policy Perspective
John Dennis Chasse
United University Professions
Jim Campen
University of Massachusetts, Boston (Emeritus Prof of Econ)
Howard Chernick
Hunter College, City Univ. of NY
Joan Costa Font
London School of Economics and Political Science (LSE)
Jim Crotty
University of Massachusetts, Amherst
Paul Christensen
Hofstra University (retired)
Kimberly Christensen
Sarah Lawrence College
Jens Christiansen
Mount Holyoke College
Nathaniel Cline
University of Redlands
David Cohen
Department for Professional Employees, AFL-CIO
Jennifer Cohen
Whitman College
Oliver Cooke
Richard Stockton College of New Jersey
Jane D'Arista
Political Economy Research Institute, UMass, Amherst
Flavia Dantas
The State University of New York, Cortland
Paul Davidson
Journal of Post Keynesian Economics
Charles Davis
Indiana University
Susan Davis
Buffalo State College
Gregory DeFreitas
Economics Department, Hofstra University
Gregory DeFreitas
Hofstra University
Amitava Dutt
University of Notre Dame
James Devine
Loyola Marymount University
Ranjit Dighe
State University of New York at Oswego
Michael Dover
Cleveland State University School of Social Work
Laura Dresser
Center on Wisconsin Strategy-University of Wisconsin, COWS-UW Ma
Nata Duvvury
National University of Ireland, Galway/ IAFFE
Peter Earl
University of Queensland, Australia
Todd Easton
University of Portland
Ross Eisenbrey
Economic Policy Institute
Justin Elardo
Portland Community College
Gerald Epstein
University of Massachusetts, Amherst
John Evans
Trade Union Advisory Committee to the OECD
Lawrence Grossberg
UNC chapel Hill
Christopher Gunn
Hobart and William Smith Colleges
Robin Hahnel
Portland State University, Department of Economics
Catherine Lynde
University of Massachusetts, Boston
Carroll Estes
Institute for Health and Aging, University of CA, San Francisco
Jeff Faux
Economic Policy Institute
Steven Fazzari
Washington University in St. Louis
Rabbi Michael Feinberg
Greater New York Labor-Religion Coalition
Marshall Feldman
The University of Rhode Island
Thomas Ferguson
Roosevelt Institute
Rudy Fichtenbaum
Wright State University
David Fields
University of Utah
Deborah Figart
The Richard Stockton College of New Jersey
Kade Finnoff
University of Massachusetts, Boston
Richard Flacks
University of California, Santa Barbara
Samuel Flint
Indiana University Northwest
Maria Floro
American University
Frederick Floss
Buffalo State College
John Foran
University of California, Santa Barbara
Catherine Forman
Southern Connecticut State University
Max FraadWolff
The New School Graduate Program in International Affairs
John Gallup
Portland State University
Angel Garcia Banchs
Central University of Venezuela; Econometrica
Heidi Garrett-Peltier
Political Economy Research Institute
Paul Garver
International Union of Foodworkers (retired)
Robert Scott Gassler
Vesalius College
Teresa Ghilarducci
Schwartz Chair in Economic Policy Analysis, The New School
G. Reza Ghorashi
Stockton College
Don Goldstein
Allegheny College
Stephen Gorin
Plymouth State University
Ulla Grapard
Colgate University
Daphne Greenwood
Colorado Center for Policy Studies and Dept of Economics, UCCS
Jo Marie Griesgraber
New Rules for Global Finance
Stephany Griffith-Jones
Initiative for Policy Dialogue-Columbia University
Lawrence Grossberg
University of North Carolina Chapel Hill
Joe Guggenheim
Economist
Hazel Dayton Gunn
Union for Radical Political Economics, URPE
Sanjiv Gupta
Dept of Sociology, Univ of Mass-Amherst
Robert Guttmann
Hofstra University
Jacob Hacker
Yale University
Robin Hahnel
Portland State University, Department of Economics
Douglas Hall
Economic Policy Institute
John Battaile Hall
Portland State University
Mark Hamilton
Milwaukee Area Technical College
John and Debby Hanrahan
DC Statehood Green Party
Geoffrey Harcourt
School of Economics, University of New South Wales
Heidi Hartmann
Institute for Women's Policy Research
John Harvey
Texas Christian University
Sue Headlee
American University
James Heintz
University of Massachusetts, Amherst
Conrad Herold
Hofstra University
Roger Hickey
Institute for America's Future
Leo Hindery Jr.
US Economy/Smart Globalization Initiative
Peter Ho
University of Denver
Joan Hoffman
John Jay College of Criminal Justice
Emily Hoffman
Western Michigan University
Barbara Hopkins
Wright State University
Kenneth Houghton
Independent Consultant
Mohamed El-Hodiri
University of Kansas
Julio Huato
St. Francis College
Heather Hurwitz
University of California Santa Barbara
Dorene Isenberg
University of Redlands
Richard Jackman
London School of Economics
Sanford Jacoby
UCLA
Arjun Jayadev
University of Massachusetts Boston
Robert Johnson
Institute for New Economic Thinking
Joel Johnson
Maine Center for Economic Policy
Stacey Jones
Seattle University
Avis Jones-DeWeever, Ph.D.
National Council of Negro Women
Helene Jorgensen
Independent Economist
Pramod Junankar
University of New South Wales, Australia
Arne Kalleberg
University of North Carolina
J K Kapler
University of Massachusetts, Boston
Jeffrey Keefe
Rutgers University
Soohaeng Kim
SungKongHoe University
Mary King
Portland State University
Eric Kingson
Syracuse University
Richard Kirsch
Roosevelt Institute
Timothy Koechlin
Vassar College
Andrew Kohen
Emeritus Professor of Economics, James Madison University
Robert Kuttner
American Prospect
Supriya Lahiri
University of Massachusetts Lowell
Melaku Lakew
Richard Stockton College of New Jersey
John Langmore
University of Melbourne
Richard Layard
London School of Economics and Political Science
Joelle Leclaire
Buffalo State College, SUNY
Thea Lee
Deputy Chief of Staff of the AFL-CIO
Keith Leitich
Pierce College, Puyallup
Hank Leland
SEIU
Margaret Levenstein
University of Michigan
Charles Levenstein
University of Massachusetts, Lowell
Henry Levin
Teachers College, Columbia University
Marc Levine
University of Wisconsin, Milwaukee
Mark Levinson
Service employees international union
David Liebschutz
Siena College
Michael Lipton
Sussex University (Research Professor of Economics)
Paul Lockard
Black Hawk College
Thomas L Power
University of Montana
Robert Lynch
Washington College
Arthur MacEwan
University of Massachusetts Boston
Jeff Madrick
Rediscovering Government
Mark Maier
Glendale College
Jean Maier
Sierra Club
Arindam Mandal
Siena College
Cheryl Maranto
Marquette University
Ann Markusen
University of Minnesota
Daniel Marschall
George Washington University
William Mass
Unviersity of Massachusetts, Lowell
Julie Ann Matthaei
Wellesley College
Peter Matthews
Middlebury College
Anne Mayhew, University of Tennessee (Retired)
Economist
Richard McIntyre
University of Rhode Island
Hannah McKinney
Kalamazoo College
Walter McMahon
University of Illinois, Retired
Michael Meeropol
John Jay College Of Criminal Justice, CUNY
Michael Meeropol
John Jay College Of Criminal Justice, CUNY
William Milberg
New School for Social Research
Michele Naples
The College of New Jersey
John Messier
University of Maine Farmington
William Milberg
New School for Social Research
Marcus Miller
University of Warwick
John Miller
Ehaton College
Jonathan Millman
University of Massachusetts, Boston
Jeff Mills
University of Cincinnati
Lawrence Mishel
Economic Policy Institute
Gary Mongiovi
St John's University
Manuel F Montes
South Centre
Leslie Moody
Partnership for Working Families
Monique Morrissey
Economic Policy Institute
Fred Moseley
Mount Holyoke College
Philip Moss
University of Massachusetts, Lowell
Tracy Mott
Department of Economics, University of Denver
Jamee Moudud
Sarah Lawrence College
Kevin Murphy
Oakland University
Marta Murray-Close
University of Massachusetts Amherst
Michele Naples
The College of New Jersey
Julie Nelson
University of Massachusetts Boston
Reynold Nesiba
Augustana College
Michael Nuwer
The State University of New York Potsdam
Phillip O'Hara
Global Political Economy Research Unit (GPERU)
Paulette Olson
Wright State University
Nancy Ortiz
Social Security Administration
Pierre Ostiguy
Bard College
Kimberly Otis
Center for Partnership Studies
Christine Owens
National Employment Law Project
Aaron Pacitti
Siena College
Spencer Pack
Connecticut College
Thomas Palley
AFL-CIO
Jairo Parada
Universidad del Norte
Richard Parker
Harvard University
James Parrott
Fiscal Policy Institute
Nelly-Eleni Pavlidou
Aristotle University of Thessaloniki, Greece
Jose Pereira
Universidad de Santiago
Kenneth Peres
Communications Workers of America AFL-CIO
Karen Pfeifer
Smith College emerita
Robert Plotnick
University of Washington
Karen Rosel Polenske
MIT
Robert Pollack
Boston University
Robert Pollin
U. Mass and Political Economy Research Institute
Marilyn Power
Sarah Lawrence College
Mark Price
Keystone Research Center
Ashley Provencher
Siena College
Edith Rasell
United Church of Christ
Robert Reich
U.C. Berkeley
Michael Reich
University of California, Berkeley
Cordelia Reimers
Hunter College, CUNY
Stephen Reynolds
Department of Economics, University of Utah
Max Richtman
National Committee to Preserve Social Secuirty and Medicare
Malcolm Robinson
Thomas More College
John Roche
St John Fisher College, Rochester NY
Charles Rock
Rollins College, Economics Department
James Rock
University of Utah
Maya Rockeymoore
Global Policy Solutions
John Roemer
Yale University
Sergio Romero
Boise State University
Stephen Rose
Georgetown University
Nancy Rose
California State University, San Bernardino
Gina Rosen
University of California, Los Angeles
Michael Rosen
Milwaukee Area Technical College
Joshua Rosenbloom
University of Kansas
Marguerite Rosenthal
National Jobs for All Coalition
Sergio Rossi
University of Fribourg, Switzerland
Benjamin Russak
UCLA - Master's Student in Urban Planning
Steve Savner
Center for Community Change
Larry Sawers
American University
Tyler Saxon
Colorado State University
Ronald Schettkat
Schumpeter School, University of Wuppertal
Ted Schmidt
SUNY Buffalo State
John Schmitt
Center for Economic and Policy Research
Markus Schneider
University of Denver
Juliet B Schor
Boston College
Elliott Sclar
Earth Institute - Columbia University
Jean Shackelford
Bucknell University (emerita)
Sumitra Shah
St. John's University (retired)
Anwar Shaikh
New School for Social Research
Nina Shapiro
Saint Peter's University
Hilary Shelton
NAACP
Heidi Shierholz
Economic Policy Institute
Richard Shirey
Siena College
Nicholas Shunda
University of Redlands
Laurence Shute
California State Polytechnic University, Pomona
Dr. Kalim Siddiqui
University of Huddersfield
Damon Silvers
AFL-CIO
Curtis Skinner
National Center for Children in Poverty
Peter Skott
University of Massachusetts
Bryan Snyder
Bentley University
Luz Sosa
AFT-Local 212
Roberta Spalter-Roth
American Sociological Association
Peter Spiegler
University of Massachusetts-Boston
Stephen Spitz
Progressive Democrats of America, PDA
Case Sprenkle
University of Illinois Econ. Prof. Emeritus
William Spriggs
AFL-CIO
J. R. Stanfield
Professor Emeritus, Colorado State U.
K C Stanfield
DePauw University
Howard Stein
The University of Chicago (emeritus)
Seguino Stephanie
University of Vermont
Mary Stevenson
University of Massachusetts Boston
James Stewart
Penn State University
Diana Strassmann
Rice University
Frank Stricker
California Faculty Association, CFA
Myra Strober
Stanford University
David Taylor
Internactional Brotherhood of Electrical Workers
Lance Taylor
New School for Social Research
Peter Taylor-Gooby
University of Kent
Peter Temin
MIT
David Terkla
University of Massachusetts Boston
Frank Thompson
University of Michigan
Alexander Thompson
Vassar College
Chris Tilly
University of California, Los Angeles
Joseph Ricciardi
Babson College
Bruce Roberts
University of Southern Maine
Richard Sims
National Education Association
Gerard Toal
Virginia Tech
Jim Tober
Marlboro College
Donald Tomaskovic-Devey
University of Massachusetts, Amherst
Charles Tontar
Merrimack College
Mayo Toruño
California State University San Bernardino
John Tower
Retired from Oakland University
Amy Traub
Demos
Scott Trees
Siena College
Dale Tussing
Syracuse University
Chethan Udayashankar
Capital University Law School
Leanne Ussher
Queens College, CUNY
David Vail
Bowdoin College
William Van Lear
Belmont Abbey College
Bryan Van Namen
Demandside Economics
Rick Vanderploeg
University of Oxford
Tara Veazey
Montana Budget and Policy Center
Roberto Veneziani
Queen Mary University of London
Matias Vernengo
University of Utah
Matt Vidal
King's College London
Valerie Voorheis
University of Massachusetts, Amherst; Marlboro College
Paula Voos
Rutgers University
Don Waldman
Colgate University
Robert Waldmann
University of Rome in Tor Vergata
Robert Watt
University of Birmingham
John Weeks
Professor Emeritus, University of London
David Weiman
Barnard College
Scott A. Weir
Wake Technical Community College
Thomas Weisskopf
University of Michigan
Robin Wells
Roosevelt Institute
Rayack Wendy
Wesleyan University
Russell Williams
Wheaton College
John Willoughby
Department of Economics, American Univefrsity
Justin Wolfers
University of Michigan
Rick Wicks
Economics Dept., Göteborgs Universitet, Sweden
Marty Wolfson
University of Notre Dame
Brenda Wyss
Wheaton College, MA
Jacqui Yeagle
Alaska Center for Public Policy
Linda Wilcox Young
Southern Oregon University
Norman Waitzman
University of Utah
Richard Wertheimer
Child Trends (retired)
James Winkler
United Methodist General Board of Church and Society
Jon Wisman
American University
June Zaccone
National Jobs for All Coalition
Ajit Zacharias
Levy Economics Institute of Bard College
David Zalewski
Providence College
James M. Zelenski
Regis University
Ben Zipperer
University of Massachusetts, Amherst
Marcia Zuckerman
Boston Workmen's Circle