There's been a lot of hand-wringing from the right-wing media this week about a possible "double-dip" recession. See Dick Morris on yesterday's Fox & Friends, during an epic rant about how President Obama can't possibly win a second term:
MORRIS: I think that Obama definitely can be defeated and will be defeated. I think that the -- it is impossible for him to avoid blame for this economy. At some point, does this guy look in the mirror and understand that everything he's done about the economy is wrong? That he's causing the second housing crisis by cutting out the mortgage interest deduction, that he's causing this double-dip recession by threatening tax increases on consumers? Doesn't he understand that he's causing the deficit with this gigantic government spending?
Or witness this exchange between guest host Martha MacCallum and Fox Business host Stuart Varney on the June 2 broadcast on America Live:
MacCALLUM: A lot of folks in the financial world very concerned that the economy is actually getting weaker at this point. They're dropping words like meltdown, double-dip recession and even depression. Just today we got word out for the new unemployment claims. They dropped by about 6,000 last week. Economists were expecting those claims to fall by almost twice that number. So here is the big number for today -- 422,000 people walked into unemployment offices and filed for claims for the first time last week.
Stuart Varney joins me now, of the Fox Business Network. Stuart, what's going on here? Why are we still struggling so much?
VARNEY: All of a sudden, the economy seems to have hit a brick wall and is weakening on all fronts. Let's go through them. Housing prices down 33 percent from a couple of years ago and still falling. Manufacturing orders falling off a cliff very recently.
[A]nd this economy is growing at less than 2 percent per year. That's almost at stalling speed for an economy which is supposed to be roaring out of a recovery. Martha, that is why you've got people like Robert Reich, former labor secretary under President Clinton, saying that we are, indeed, heading towards a double-dip recession. Big negatives on the economy.
It is indeed true that economist Robert Reich recently penned a gloomy Financial Times op-ed, though what he wrote was, "It is unlikely that America will find itself back in recession but the possibility of a double dip cannot be dismissed."
What does Reich, who served in three administrations and was Secretary of Labor under President Clinton, think is causing our economic woes? From his op-ed (emphasis added):
The recovery has stalled. It is unlikely that America will find itself back in recession but the possibility of a double dip cannot be dismissed. The problem is not on the supply side of the ledger. Corporate profits are still healthy. Big companies continue to sit on a cash hoard. Large and middle-sized companies can easily borrow more, at low rates. The problem is on the demand side. American consumers, who constitute 70 per cent of the total economy, cannot and will not buy enough to get it moving. They justifiably worry that they will not be able to pay their bills, or afford to send their children to college, or to retire.
The timing is unfortunate. Foreign consumers will not help much even if the dollar continues to slide. Europe's debt crisis and embrace of austerity, Japan's tragedy and China's fiscal tightening have reduced global demand. At the same time, the federal stimulus in the US has almost run its course. The Federal Reserve is about to end its $600bn of purchases of Treasury bills, designed to bring down long-term interest rates and make it easier for homeowners to refinance. Worse yet, state governments - starved for revenue and constitutionally barred from running deficits - continue to cut programmes. Local governments are now in worse shape, laying off platoons of teachers and firefighters.
Hmm. And what does he think the government should do about our sluggish economy? He writes (emphasis added):
Under normal circumstances, this would be the time for the federal government to take bold action to ward off a double dip. For example, it could put more cash in peoples' pockets while giving employers an extra incentive to hire by exempting the first $20,000 of earnings from payroll taxes, for a year or two. It could lend money to state and local governments. It could launch a new Work Projects Administration (modelled after its antecedent during the Great Depression) to put the long-term unemployed to work on public projects. It could amend the bankruptcy law to allow people to include their prime residences in personal bankruptcy, thereby giving homeowners more leverage to get mortgage lenders to mitigate the terms of their loans.
So Reich, who is the source of the "double-dip" comment the right-wing media are fearmongering over, notes that corporate profits are "still healthy" and that solutions might include "put[ting] more cash in peoples' pockets ... lend[ing] money to state and local governments" and spending on public works projects to reduce unemployment.
If that sounds really familiar, it should: the American Recovery and Reinvestment Act (ARRA), better known as the stimulus, did all of that. Reich's not alone -- nonpartisan studies and scores of economists have agreed that the economy would be worse today without the 2009 stimulus; many argued the stimulus should have been bigger.
But as you know if you've tuned in to so much as 10 minutes of conservative media in the past two years, all of them remain adamantly opposed to the solutions economists prescribe. Morris argued on June 2 that "everything [Obama has] done about the economy is wrong" and "he's causing the deficit with this gigantic government spending." (Not true.) Varney, on America Live, said that "Democrats and the left generally want another big stimulus program which would include a lot more spending on infrastructure and aid to the states. In other words, keep on going, more government spending. ... Republicans, on the other hand, they want to cut corporate tax rates so you attract all that overseas money back into America." (Actually, as Reich pointed out, corporate profits are already quite high -- they were the highest on record in the third quarter of FY2010.) And, discussing falling housing prices, Fox Business' Charles Payne told Fox News' Happening Now host Jenna Lee on May 31:
PAYNE: I honestly believe that this -- the administration did too many things, to be quite frank with you, and they skewed what is normally known as a business cycle. I think our economy would be back on track, or doing better, if there wasn't so much intervention.
Now that the debate over raising the debt ceiling is in full swing in Congress, the same right-wing pundits are wailing that it will be the end of the world if the debt limit is raised without deep cuts in spending. Payne told Lee on Happening Now, "[A] lot of people are actually pretty excited about [an agreement on the debt ceiling] going to the wire and maybe making some concessions that don't involve adding another two trillion to the debt." Some pundits have completely opposed raising the debt ceiling, in order to, in the words of Fox Business host Eric Bolling, force Congress to "stop spending."
Economists, however, feel quite differently about the debt limit -- most have agreed that failure to raise it could be catastrophic. (Even Varney admitted "it would indeed be Armageddon" if Congress didn't raise the debt ceiling.) And many economists think government spending shouldn't be curtailed until after the economy has been able to recover. As Paul Krugman pointed out in his June 2 New York Times column, "withdrawing fiscal support much too early" could be the real cause of the recent economic slump. Krugman compared our current economic situation to that of the "mistake of 1937":
Earlier this week, the Federal Reserve Bank of New York published a blog post about the "mistake of 1937," the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post's author (with whom I have done research) points out, economic conditions today -- with output growing, some prices rising, but unemployment still very high -- bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?
Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 -- and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.
By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity.
So, here we are, in the middle of 2011. How are things going?
[T]he news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation -- but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.
So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.
Yet worse things may soon happen.
On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding a U.S. default. If this blackmail succeeds, it will put a further drag on an already weak economy.
In other words, here's what's happened in the past two years:
1. The right-wing media drummed up opposition to the stimulus (against the advice of economists).
2. They relentlessly claimed the stimulus failed (all evidence to the contrary).
3. Now they are demanding huge budget cuts in exchange for raising the debt limit (while economists warn against ending fiscal support too soon and even some right-wing pundits agree it would be "Armageddon" not to raise the debt ceiling).
4. Then the right-wing media uses economists' worries of a "double-dip" recession to fearmonger and stoke support for their preferred policies -- the ones that economists agree would make the recession worse.
What's frightening is that the right-wing media have 24/7 access to millions of Americans, while economists -- as one 2009 Media Matters report found -- are given only a tiny fraction of airtime on cable news. Is Fox really worried about a "double-dip recession" -- or their own ability to make money off scaring people?