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Galbraith: Lousy Economy, Political Reality Mean GOP Can't Cut Deficit

Posted Nov 05, 2010 07:00am EDT by Aaron Task in Newsmakers, Recession

There was joy on Wall Street Thursday as the stock market surged in reaction to the Fed's QE2 announcement.

But there's no joy on Main Street, where the housing market remains grim and hiring punk, at best. Economists expect only modest payroll growth (60,000) from Friday's job report for October while the unemployment rate is projected to remain at 9.6%.(See: James Galbraith's Radical Plan to Create jobs: LOWER the Retirement Age)

Despite a recent patch of better-than-expected economic reports, "we're looking at a long period of very slow growth, at best, and sustained high unemployment," says University of Texas Professor James Galbraith. "We're looking at a very unhappy population for a long period of time." (See: What's Bernanke Smoking? "A Complete Mystery" How QE2 Helps the Economy, Galbraith Says)

 

Americans' unhappiness with the economy was on full display Tuesday, when the Democrats suffered their worst midterm election defeat since 1938. A wave of anti-incumbent sentiment put the Republicans back in control of the House of Representatives and severely narrowed the Democrats majority in the Senate.

Somewhat surprisingly, however, Professor Galbraith is not too concerned the GOP surge will augur a new era of fiscal austerity, or even a serious effort to reduce the deficit.

Cutting the Deficit: Reality vs. Fantasy

"I think it's going to be very difficult for new Republican majority to implement draconian spending cuts," he says. "My guess is when push comes to shove, our new Republican legislators will behave like old Republican legislators always have and support their local interests. I hope so because that's a good policy choice."

Specifically, he says it's unlikely the GOP will seek big cuts in the Food Stamps program, which benefits farmers in the Midwest. Republicans are also unlikely to slash military spending. The new Congress may attack earmarks "but that's practically nothing" in relation to the vast scale of the federal budget, Galbraith says.

Meanwhile, Tuesday's demise of so-called Blue Dog caucus is going to result in a "more unified, more cohesive and more progressive" Democratic party in the House, he predicts. That means Social Security and Medicare are even less likely to suffer cuts than prior to the Midterm election, when only the most staunch conservatives were even discussing it.

"Reality will prevail [and] we're going to be running very large deficits for the foreseeable future," Galbraith says. "Unless the underlying private economy can be made to recover...the deficit is not going to go away no matter what Congress does. It's a King Canute problem - [Congress] cannot wish the tied to recede."

Finally, while President Obama's apparent concession on extending the Bush tax cuts was praised by conservatives, it will add an estimated $4 trillion to the deficit over the next decade. (See: Election Post-Op: Republicans Win, Deficit Hawks Lose)

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119 comments

  • 0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
    johngol Mon Nov 08, 2010 12:23 pm EST Report Abuse
    its pretty easy to cut spending every department of the fed has managers....make them manage here is your budget its 20% less than last year check every invoice and shop around for the cheapest price check everything for earmarks ect ect tell the managers to manage
    i'm a manager in the private sector and i have had to make cuts up to 40% over the last 3-4 years i'm working like a dog checking everything 2-3 times making alot less money and having to pay 27% more for healthcare and 1.11 more a gallon of gas and about the same for heating oil when times are tough you make tough choices te feds would save 900 billion with only a 20% slash try a 40% its not easy but you do what you have to do period
  • 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 5 users disliked this comment
    Billy Clintonus Sun Nov 07, 2010 07:56 am EST Report Abuse
    The biggest problem with Republicans is when they start acting like Democrats. If Republicans actually kept their campaign promises, the country would be much better off. Of course, power corrupts and absolute power corrupts absolutely. After (8) years of Bush who enjoyed Republican majorities in both the House and Senate for his first (6) years of office and now Obama who had huge majorities in both the House and Senate for (2) years, I hope Americans realize that divided government works. My sympathies are conservative, but giving either party too much power is dangerous.

    People should remember that Congress (both the House and Senate) have been controlled by the Democrats for (4) years. The last (4) years have been the worst years I can remember for America. Bush is gone. Good riddance, but there are still a lot of Democrats who had a hand in crafting the policies which got us here and have exacerbated the situation since then: Barney Frank, Nancy Pelosi, Harry Reid and our President Barack Obama who was a Senator in that Democrat controlled Congress. The Democrats as a party have had (4) years to come up with solutions but prefer to dig a bigger hole for the country. Are they trying to bury the country?

    Come on. Is it a coincidence that the mascot for the Democrats/liberals/progressives is a jackass? I think not.
  • 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 3 users disliked this comment
    Billy Clintonus Sun Nov 07, 2010 07:40 am EST Report Abuse
    I love these liberals who like to spread lies and misinformation. I suppose if they tried to make logical arguments they would fall flat on their faces.

    Whenever the topic of deficits come up, liberals/Democrats immediately talk about Presidents. The power of the purse (the ability tax and spend) lies with the Congress, and the Democrats/liberals have been the biggest spenders since biblical times. Do liberals/Democrats think the average American is stupid? Yes and especially the people who vote for them. Anyone with half a brain can see through their lies and misinformation. It's really embarrassing and shameful, but then those are (2) words which Democrats/liberals don't understand.

    Back to the topic of deficits just look at who controls Congress. Then we see a very different story. For example, Bill Clinton had to deal with a Republican controlled Senate and House for his last (6) years in office. Bill Clinton did not leave Bush with a budget surplus. The Republican controlled Congress did! They controlled spending and taxing. CONTROL is the key word. Something Democrats never have displayed when it comes to our money.

    Conservatives and Republicans certainly have their opinions, but I don't see the outright lies and misinformation displayed by the left. But then liberalism/progressivism is the new religion and simply requires belief. Logic and rational thought are to be strongly resisted.
  • A Yahoo! User
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    A Yahoo! User Sat Nov 06, 2010 11:03 am EDT Report Abuse
    We have wiped out the 1.3 trillion deficit with the 11% devaluation. What is 11% of 14 trillion. Do I have to explain everything to Zombie Nation. There will no gridlock . I have been saying all year that Obama is a team player who is also a winner. To win again what does he need. Everyone raise your hand if you know. Right. He needs jobs and growth. The dollar has been sacrificed for growth . Taxes, healthcare will be put on back burner for growth . He knows that he can't pay for healthcare without a robust economy. This means blue skies for the investor.
    The Demorats have become a default party. They sure put up a helluva fight . I never heard them defend the last two years.They probably thought that it would only make matters worse for them. The Stimulus should have all been spent on infrastructure. The Interstate had an exponential impact on GDP in 1956. We would have full employment now and normal growth. Obamacare should have been deferred. As the homies say, you slip and they grip.
  • 8 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 3 users disliked this comment
    Mozart Fri Nov 05, 2010 04:56 pm EDT Report Abuse
    If history is any guide, the Republicans typically preach fiscal responsibility but they do not practice it. Any every year that there was a Republican President in office since Nixon, there has been a fiscal budget deficit. It doesn't matter who controls the house our senate either. Doing the 6 years that the Republicans controlled all branches of gov't they increased the deficit. In fact, one can argue that the starting of the war and increasing the budget deficit while decreasing taxes was the most fiscally irresponsible move ever perpatrated on future generations. The baby boomers have borrowed and spent this country into massive debt. It is they who will still collect social security. It will be gen x which is still paying into it that will keep it solvent just long enough for all of the boomers to milk it dry, leaving gen x'ers with nothing. Anyone under the age 45 should be outraged. In 2012, vote out every single incumbent. They are all to blame for this mess. Take away the fed gov't pesnion plan and impose term limits on all of them. I smell another constitutional amendment.
  • A Yahoo! User
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    A Yahoo! User Fri Nov 05, 2010 02:20 pm EDT Report Abuse
    The Republicans have promised fiduciary deliverance. To get there, all we have to do is cross the bridge to nowhere. They want us to save our souls, and they tell us that's good for our pocketbooks. What nonsense! Republicans are corrupt meddlers.
  • 4 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this comment
    Pragmatic Fri Nov 05, 2010 02:17 pm EDT Report Abuse
    The tomatoes growing in my yard, on my mortgage free property didn't suddenly get more expensive. I already have TVs, and cars and computers.

    So I don't care... Money is money. If I paid in, I expect to get it back - whether its printed paper or not. Squeezing SS and healthcare like the Reps are scheming to do does not benefit me one iota.

    BTW our currency did not go lower against the only four nations that really matter. Canada/Mexico/China/Saudi Arabia.

    Americans don't "need" BMWs and French cheese.
  • 11 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this comment
    gary Fri Nov 05, 2010 02:15 pm EDT Report Abuse
    Few problems on the horizon that alot of folks seem to miss and I can't for the life of me see why we cannot get it right

    1. The welfare is for the poor not for the lazy people and for the folks who can claim children they do not have . Revisit this and you would save millions of dollars. I would be more than happy to start a child care facility and have these folks work on cleaning up the roads . earn there pay

    2. Medicare - What happen to fixing the corruption and making billions of dollars to pay for the new health care plan - Not happening so that means it going to cost us a whole lot more. Fix this . Again a couple more billion in this pocket

    3. Social security - Reign in the folks who are illegally collecting social security and I bet you would make billions off of this

    4. Illegal immigration - Pa lost 600 million dollars just in paying for this , imagine what the cost is to California. Fix this and you would be making some cash

    These are some of the issues that can be addressed and worked , it has been left go so long it is pathetic. For somebody to say there is nothing we can due to cut the deficit is problably the same person who has earmarks that could be in trouble. Ummhh what do you think
  • A Yahoo! User
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    A Yahoo! User Fri Nov 05, 2010 02:04 pm EDT Report Abuse
    Bill Ray ...If they don't follow through on their promises, vote them out just like America did to the friggen Democrats. What does it take for you people to grasp the fundamentals of using the vote as a mechanism to improve government. You are more interested in whining instead of trying to fix the problem. If you don't want to fix it, get the frig out of the way.
  • A Yahoo! User
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    A Yahoo! User Fri Nov 05, 2010 01:57 pm EDT Report Abuse
    SoCal, the more money the government puts into the economy, the currency goes lower. You benefits are now affected. Yesterday was another perfect example of the government influence. The market goes up wildly on low volumes ... traders and banks make out .... when all is said and done ... How much money did you make? The dollar is diluted even more ... Your paycheck, your benefits, your quality of life was affected by the government's "help" and it was not in a good way.

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