Saturday, August 6, 2011

Cornell’s Robert Frank: Focus On Jobs, Not Deficit

Professor Robert Frank of Cornell University explained to Rachel Maddow that our current path will only make the economy worse (a point also made by Paul Krugman). Consumers and businesses aren’t spending and the only force that can stimulate the economy is the government. Unfortunately, the emphasis now is on cutting–and doing so without additional revenue. Further, the emphasis is on the deficit rather than creating jobs that enable people to spend and stimulate the economy on their own. Watch:

Frank: We’ve known for over 60 years that in a situation that where we’re in now where there is persistent shortfall of demand, government can invest in public works projects and other things that will get the economy back on its feet. It could be done. It’s quite easy to do. The workers are there who know how to do the jobs. The market’s happy to lend us the money. As Ezra said, they’re eager to loan us more money at very low interest rates. The cost of debt compared to the cost of unemployment is incredibly low. A trillion dollar deficit costs us $25 billion a year to pay the interest on that. If we have an extra ten million people unemployed that’s $250 billion lost forever each year, so it’s a 10 to 1 tradeoff. We’re focusing on deficit reduction when we really out to be focused on job creation, and we know how to do it… Focusing on the deficit, cutting spending that’s going to make the deficit bigger. What we’re doing now is just unimaginably stupid.” (h/t: Politicus USA)

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