View that spending kills jobs gains traction, despite expert consensus

Zachary Roth
Senior National Affairs Reporter
The Lookout

Yet another poll has found that Americans are deeply pessimistic about the current state of the economy. The survey also suggests that many now support an approach to fixing things that most experts think would only make things worse.

Just 23 percent of respondents to a Bloomberg poll said they see signs of improvement in the economy, while 66 percent said they think the country is on the wrong track. Meanwhile, 55 percent say their children will have a lower standard of living than they did. And in particularly bad news for the White House, 44 percent say they're worse off than when President Obama took office in January 2009; just 34 percent say they're doing better.

Those results are in sync with other recent polls that have showed pervasive economic gloom. Unemployment is currently at 9.1 percent and forecasters are expecting another quarter of tepid GDP growth.

But another result from the Bloomberg poll suggests a fair amount of of public confusion about how to turn things around. Fifty-five percent of respondents said cuts in government spending and taxes would be more effective at creating jobs than maintaining or increasing government spending.

The question is confusingly formulated, because economists usually think of tax cuts and spending increases as part of the same stimulus-based approach, not as opposing approaches. But at root, the results appear to indicate that most Americans think cutting spending, not increasing it, is more likely to create jobs.

But that's almost the opposite of what most experts--on both sides of the political divide--believe. "That wouldn't square with the way we normally think about economic activity in a depressed economy," Andrew Samwick, a former chief economist on President Bush's Council of Economic Advisers, told The Lookout. When the economy suffers from a lack of demand, as it does now, Samwick explained, most economists think increasing spending is the more effective way to generate that demand and get things moving again.

Why has the opposite view begun to take hold? In part, Samwick argued, it's thanks to the efforts of congressional Republicans, who want budget cuts and lately have hammered home the view that government spending has stymied growth. "You have the Speaker of the House talking about job-killing government spending," said Samwick, now a professor of economics at Dartmouth College. "But they have not been tasked with making clear exactly how the government is killing jobs."

Republicans have suggested that government spending creates an expectation that taxes will have to go up, and the resulting uncertainty crimps hiring. But Samwick said that if that were true, the same trend would have led businesses to hold off on making investments in machinery--something that's not happening.

In an op-ed in Tuesday's Wall Street Journal entitled "The GOP Myth of Job-Killing Spending,"Alan Blinder, a former vice chairman of the Federal Reserve, rebutted in more detail the notion that government spending kills jobs. In reality, Blinder wrote, massive spending cuts "would imperil a still-shaky economy that is not generating nearly enough jobs."

Of course, most observers agree that in order to bring the deficit under control over the long-term, government spending--mainly health-care spending--will need to be reduced. But on the shorter-term issue of how to finally jolt the economy and start creating jobs, many Americans seem to have absorbed a view that runs counter to the clear expert consensus.

It's not hard to see why that anti-government message has gained traction. The 2009 stimulus bill failed to deliver the sustained job growth that the Obama administration had promised, leading many Americans to question the idea that government spending can help create demand.

But few economists have abandoned the idea--indeed, a good number argue that had the stimulus been larger, it would have been more effective. Experts aren't always right, of course. But in this case, there's little empirical evidence to challenge the long-held consensus view. Which is why, as we look for ways to get out of our current economic mess, the gap between public and expert opinion is worrying.

(Photo of House Speaker John Boehner: AP/Susan Walsh)