Sobering Counterfactual Economic “Statistic” of the Day
In today’s New York Times, Paul Krugman reports that, according to the consulting firm, Macoeconomic Advisers, “unemployment [in the United States] is 1.4 percentage points higher than it would have been in the absence of political confrontation, enough to imply that the unemployment rate right now would be below 6 percent instead of above 7.”
This claim is based on the belief that the U. S.’s “crisis driven” fiscal policy — which has been the norm since 2010 — has subtracted about 1 percent off the U.S. growth rate for the past three years. This implies cumulative economic losses — the value of goods and services that America could and should have produced, but didn’t — of around $700 billion.”
While Krugman does not entirely endorse the numbers – saying they should not be taken “as gospel,” he agrees that they reflect the “sharp fall since 2010 in discretionary spending as a share of G.D.P. — that is, in spending that, unlike spending on programs like Social Security and Medicare, must be approved by Congress each year. Since the biggest problem the U.S. economy faces is still inadequate overall demand, this fall in spending has depressed both growth and employment.”
It’s all the fault of House GOP members, who since taking over Congress in 2010, have resisted any compromise with the Obama Administration. As Krugman concludes: “Elections have consequences, and one consequence of Republican victories in the 2010 midterms has been a still-weak economy when we could and should have been well on the way to full recovery.”
Counterfactually speaking, had the Democrats retained the House in 2010, the country would have emerged more rapidly out of its persisting economic malaise.