Wednesday, November 26, 2008

Contraction, Expansion

From DS, a little brush up on basic economics.

For those who never took or don't remember Economics 101, two headlines from the front page of today's Washington Post tell you pretty much everything you need to know about the basic quandry facing economic policymakers in Washington right now:

"US Spending Continued Decline in October."

"Food Stamp Use Nears Record."

A contracting economy kills jobs and income and reduces public revenues, even as it boosts demand for public services. A rapidly contracting economy like the one we are facing now does so at a dramatic pace. That's why virtually no one is talking much about "fiscal discipline" right now.
We are seeing a little political posturing - even from Obama - on the spending vs. cuts promises, but anyone arguing spending cuts as a solution to our current economic slump is either 1) still campaigning in a special election or 2) dumb. Even the Blue Dogs - who love to hear themselves talk when it comes to faux "fiscal responsibility" - are silent.

There may be specific cuts to be made, and belts that can be tightened, but overall, the solution to the overall downturn is going to be - should be - increased domestic spending.

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