Fox Figures Call For More Spending Cuts

Varney: Claim That Cutting Spending Would Hurt Economy Is “The Exact Opposite Of True.” During the February 15 edition of Fox News' Fox & Friends, Fox Business host Stuart Varney claimed that Treasury Secretary Timothy Geithner's assertion that cutting spending would hurt the economy was “the exact opposite of true.” From the broadcast:

GRETCHEN CARLSON (co-host): Well, Republicans say that the president's spending plan will give America a larger, European-style government, but Treasury Secretary Tim Geithner says making more cuts right now would hurt the economy.

GEITHNER [video clip]: There are some who have suggested that we should cut deeper and faster with more severe austerity now. That approach, though, would damage economic growth. It would reverse the gains we've achieved in getting more Americans back to work and healing the damage caused by the financial crisis. And it would push more Americans into poverty.

CARLSON: Stuart Varney is here with his analysis. All right, let's dissect what the Treasury Secretary just said. When you hear that, what do you think?

VARNEY: I think the exact opposite is true. What -- when Secretary Geithner opens his mouth, out comes Obamanomics. And he is saying the government spends more, you'll get more growth in the economy. Ignore the debt buildup. Treasury Secretary Geithner says, you tax people more, you get more revenue -- ignore the damage that that does to the economy. Now, I disagree with that entirely. I think he's -- what he's doing is, he's convincing people, or trying to convince voters, that if we spend more money and create a European-style social democracy -- spend more, give more, more cradle to grave security -- if we do that, the rich will pay for it. I think the exact opposite. The rich cannot pay for all of this, and we must not ignore the buildup in debt, and we must not ignore the damage that tax increases do to the economy. [Fox News, Fox & Friends, 2/15/12]

Carlson: “If The Economy Was Worse Than [Obama] Expected, Then Wouldn't You Be Proposing A Budget That Had More Cuts In It?” Later, during the February 15 edition of Fox News' Fox & Friends, co-host Gretchen Carlson asked Fox News contributor Sarah Palin, “If the economy was worse than [Obama] expected, then wouldn't you be proposing a budget that had more cuts in it?” From the broadcast:

CARLSON: We're back with former Alaska Governor Sarah Palin. I mean, I hate to bring it up, but if the economy was worse than he expected, then wouldn't you be proposing a budget that had more cuts in it?

PALIN: You would think so. What he does is defy common sense -- and also, did you catch what he was saying in there? He is now blaming the estimators, the statisticians, the economists. Everyone else is to blame for the economic woes except for his failed policies? That is another indication of his naiveté and his un -- he's not fit to hold this office, because we need leadership that will be held accountable, that won't shy away from taking responsibility for mistakes that they have made, and President Obama has made many mistakes in allowing increased taxes, allowing government to grow, accumulating trillions and trillions of dollars more in debt -- though, yes, as you point out, he had promise to do cut deficits in half. [Fox News, Fox & Friends, 2/15/12]

But Economists Agree That Spending Cuts Right Now “Could Impede ... Economic Recovery”

EPI: "[T]he Budget Wisely Does Reflect The Reality That Too-Rapid Fiscal Tightening Could Impede The Current Economic Recovery." In a February 13 blog post, Ethan Pollack of the Economic Policy Institute (EPI) wrote:

While we would argue that [Obama's] proposals provide less fiscal support than the economy still needs, the budget wisely does reflect the reality that too-rapid fiscal tightening could impede the current economic recovery.

“The largest single investment in the president's budget -- a $476 billion transportation reauthorization -- represents a $125 billion increase in investments in roads, bridges, and transit systems over 10 years relative to spending levels projected under current laws. These investments are vital to long-run economic growth and global competitiveness, and are in sharp contrast to the recent House GOP bill to slash transportation investments over the coming years. [EPI, 2/13/12]

Reich: “America's Jobs Deficit Continues To Be A Much Larger Problem Than The Budget Deficit.” In a February 3 blog post, former Labor Secretary Robert Reich wrote:

When they're not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America's jobs deficit continues to be a much larger problem than the budget deficit.

In fact, we can't possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. [RobertReich.org, 2/3/12]

Bernanke: Congress Must “Take Care Not To Unnecessarily Impede The Current Economic Recovery. In a February 2 article, The Washington Post reported:

Federal Reserve Chairman Ben S. Bernanke on Thursday cautioned lawmakers against taking any steps that would hurt economic growth as they work to cut the nation's debt, and he defended the central bank's recent actions to support the economy.

In testimony before the House Budget Committee, Bernanke urged Congress to put a priority on finding a sustainable level of federal spending over coming decades.

But, he said, they also must ”take care not to unnecessarily impede the current economic recovery." Supporting growth now, he said, “will lead to lower deficits and debt in coming years.” [The Washington Post, 2/2/12]

Moody's Economist Zandi: “I Wouldn't Add To Cuts This Year Or Next, Given The Fragile Economy.” CNNMoney reported on July 11, 2011:

There is a danger in cutting too much too soon, according to Mark Zandi, chief economist at Moody's Analytics, who favors big spending cuts so long as they don't take effect for a few years.

“I wouldn't add to cuts this year or next, given the fragile economy,” Zandi said. “There is already plenty of restraint on the books.” [CNNMoney, 7/11/11]

Krugman: Cuts Would Lead “To The Elimination Of Hundreds Of Thousands Of Jobs.” In a March 3, 2011, New York Times column, economist and Nobel Prize winner Paul Krugman wrote:

The clear and present danger to recovery, however, comes from politics -- specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more. Quite aside from their negative long-run consequences, these cuts would lead, directly and indirectly, to the elimination of hundreds of thousands of jobs -- and this could short-circuit the virtuous circle of rising incomes and improving finances.

[...]

[I]t's hard to see how such an obviously irresponsible plan -- since when does starving the I.R.S. for funds help reduce the deficit? -- can improve confidence.

Beyond that, we have a lot of evidence from other countries about the prospects for “expansionary austerity” -- and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.”

And do you remember the lavish praise heaped on Britain's conservative government, which announced harsh austerity measures after it took office last May? How's that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.” [The New York Times, 3/4/11]