GOP Obsession With Austerity Is to Blame for Sluggish Economic Recovery

Fiscal austerity in the wake of the Great Recession—imposed by Republicans on the federal, state, and local levels—is responsible for the sluggish pace of economic recovery since 2009, states a new paper that undercuts conservative attempts to pin the blame on President Barack Obama.

“By far the biggest drag on growth throughout the recovery from the Great Recession has been the fiscal policy forced upon us by Republican lawmakers in Congress and austerity-minded state legislatures and governors,” wrote Josh Bivens of the Economic Policy Institute (EPI), which put out the analysis on Thursday.

Because the “ability of conventional monetary policy to spur recovery following the Great Recession was more limited than in any other post-war recovery,” Bivens explained, increases in government spending and federal aid to states were necessary to help working Americans following the recession that began in December 2007 and ended in June 2009.

“Had the Obama administration made such a powerful case for why austerity was hampering growth, it could have educated the public and potentially helped build support for more sensible policy the next time the United States faces a recession.”
—Josh Bivens, Economic Policy Institute

“Given the degree of damage inflicted by the Great Recession and the restricted ability of monetary policy to aid recovery, historically expansionary fiscal policy was required to return the U.S. economy to full health,” said Bivens, who is EPI’s research and policy director. “But this government spending not only failed to rise fast enough to spur a rapid recovery, it outright contracted, and this policy choice fully explains why the economy is only partially recovered from the Great Recession a full seven years after its official end.”

From GOP spending cuts to the refusal of states to accept “free fiscal stimulus from the Medicaid expansion under the Affordable Care Act,” Republican lawmakers “have embraced and enforced fiscal austerity, and the result has been the most discouraging recovery on record,” he said. 

(In fact, even the stimulus measures that were enacted were criticized at the time as too small to make a real difference.)

As the Guardian notes, “[t]he report comes as the Republican party once again calls for the reining in of government spending and reductions in the deficit.”

But, while it’s clear that “Republicans remain steadfast in their opposition to government spending—even for government jobs like teaching, firefighting, and emergency management,” Campaign for America’s Future blogger Richard Eskow notes that “a lot of Democrats have bought into the myth, too.”