The election’s impact on our recovery
TEXT OF INTERVIEW
BOB MOON: Looking toward a shift in power on Capitol Hill, the word of the day was “compromise.”
President Obama is pledging to work with Republicans after they seized control over the House of Representatives. But as he spoke to reporters today, he stuck to most of his economic positions — even as he acknowledged that new Republican power in Congress brings added pressure to rein in government spending.
Our Washington bureau chief John Dimsdale joins us now. And John, that’s how the Republicans rode to victory, on their vow to control spending. So how do they propose to do that?
JOHN DIMSDALE: Well, they’re short on specifics. For one thing, they want to stop spending any more stimulus money. But most of that $700 billion is already out the door. Uncommitted stimulus money is in the range of about $20-$50 billion, but not enough to make a difference. House Republicans have talked about an across-the-board freeze on discretionary spending, that’s the shrinking part of the budget that isn’t mandated by Social Security or other entitlement programs. And this morning the probable Speaker of the House, John Boehner, was asked about his intentions on getting spending under control.
JOHN BOEHNER: I believe that operating under the 2008 levels of spending — before the bailouts, before the stimulus — is a responsible way forward.
MOON: But that stimulus — by some measures at least — helped avoid a more severe economic downturn, John. For a while, during the credit crisis in fact, it seemed Uncle Sam was the only one spending any money — even though it was borrowed money — can turning off the government tap be good for the fragile recovery?
DIMSDALE: Well that’s certainly a concern for a number of economists and Democrats. One of them is Robert Shapiro. He worked in the Clinton administration, he was an outside adviser for the White House when Republicans took over the House in 1994. He points out that Japan cut off its stimulus too early in 1998, and they slid back into recession.
ROBERT SHAPIRO: There is no serious economics that says in an environment in which you have very slow growth, and in particular with very low interest rates, that what makes sense is fiscal austerity.
But, you know, we may be about to find out what makes sense because this election is likely to bring in a wave of austerity from Congress, especially from new Tea Party members. Democrats might worry about stalling the economy, but former Republican Congressman from Minnesota, Vin Weber, says Republicans see things differently.
VIN WEBER: They believe quite the contrary. That the amount of debt we’re adding is putting adverse pressure on the credit markets and creating long-term uncertainty about the United States’ fiscal viability., and the cutting down on spending will actually be helpful to the economy. But it’s clearly a clash of ideologies and economic ideologies.
MOON: OK. What about those Bush tax cuts that are about to expire. They’re obviously popular. They helped get a lot of Republicans elected. Will Republicans push for them even though that could increase the debt?
DIMSDALE: Well, they will. They say that more money in people’s pockets will get the economy going eventually over the long term and bring down the deficit as the strong economy creates more tax revenue. The Democrats say, ‘Well we tried that sort of trickle-down theory before and it didn’t work.’ And if the government’s going to live within its means, citizens — especially those who benefited the most — are going to have sacrifice. It’s just another one of those ideological clashes that weren’t resolved by yesterday’s election.
MOON: John Dimsdale, thanks.
DIMSDALE: Thank you.
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