Austerity is Dead

It’s Time to Focus on Jobs & Growth

For the better part of three years Washington has been gripped by an obsession with the deficit, but a new paper out from the Center for American Progress today argues that it’s time to abandon austerity, ditch deficit hysteria, and instead focus on jobs and economic growth.

What’s changed since Washington caught deficit fever in 2010? A lot, as it turns out.

The deficit has been significantly reduced and stabilized.

We have already enacted significant deficit reduction: $2.5 TRILLION worth, three-quarters of which has come from spending cuts.
Health care spending has grown much more slowly than expected, due in part to Obamacare.

The intellectual argument in favor of austerity collapsed in a somewhat spectacular fashion.
The implementation of austerity in Europe has been nothing short of disastrous. Unemployment in the Eurozone is at a record high and the UK’s austerity almost resulted in triple-dip recession and has actually resulted in more, not less debt.

What hasn’t changed? We continue to have tepid growth and the economy is not creating nearly as many jobs as it could or should be.

In fact, we don’t even need the painful and ill-conceived sequester cuts to achieve the level of deficit reduction that we originally set out to, hence the report calls for replacing it for the next three years.

So instead of painful austerity and needless hysteria about the deficit and debt, we ought to be making investments in order to grow the middle class and the economy along with it. The report identifies $82 BILLION worth of pro-growth investments:

$50 BILLION to fix our crumbling infrastructure.
$20 BILLION for early childhood education.
$12 BILLION for the “Pathways Back to Work Fund,” which would help provide opportunities for the long-term unemployed, young people, and low-income people.

Now is the perfect time to make these kinds of investments as interest rates on government bonds are unusually low right now.

In addition to all of these key facts, it’s also time to recognize some political realities. Since Republicans refuse to negotiate in good faith toward a so-called “grand bargain” there is no point in continuing to pursue one. Instead, we ought reset the debate, replace the sequester for three years with an achievable package of cuts and revenue increases, and turn our attention toward making the investments we need to fuel jobs and growth.

You can read the entire report in all of its wonky goodness HERE.

BOTTOM LINE: Austerity is dead — or at least it should be.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.