The problem with focusing on deficit reduction now.

With Republicans pushing for deficit reduction they are not only ignoring the number one issue in America right now, jobs, but they are actually making it worse. Recent reports by Mark Zandi and Goldman Sachs show that the Republican cuts would lower growth and cost jobs. Given that lower unemployment and higher growth are two important tools in reducing the deficit this legislative priority seems like cutting off ones nose to spite ones face.

Since he disagrees with them Republicans are suggesting that Mark Zandi has no credibility. They base this claim off of his support for the stimulus package however many of these same Republicans touted Zandi’s support of the Bush era tax cuts just months ago. So Zandi went from being credible as the lead economic advisor for John McCain to discredited during the stimulus debate, to credible when discussing the Bush tax cuts and again discredited for pointing out the flaws in the Republican legislative priorities. Talk about flip flopping.

I would argue that the credibility issue here lies with the politicians who pick and choose what economic report they believe based on their opinion, not with the economists. As an example of this, Republicans are pushing analysis of their budget cuts by John Taylor because his model relies on the belief that the reason businesses are holding historic amount of cash and not creating new jobs is because of uncertainty. If you recall this was the same excuse used to pass the Bush tax cuts. So how did these companies react to the certainty created by extending the Bush tax cuts for two years? The economy added a total of only 36,000 new jobs in January which was well below earlier estimates.

At some point this claim has to become the boy who cried wolf. Businesses are not in business to create jobs. If they were they have plenty of money to do so. They are in the business of making money and hiring people to create more products makes no sense when no one is buying the product.

There is a great fallacy at play here in the John Taylor model and that is the belief that Reaganomics worked because of Trickle Down Economics when in reality it worked because of the stimulus spending that followed. Reagan poured billions of tax payer dollars into defense and that spending and subsequent debt, created jobs and those jobs helped the economy. If you understand this you see where Zandi and Goldman Sachs are coming from. They believe lower taxes AND government spending are stimulators because they both create jobs. This doesn’t necessarily fit with the narrative from either the left or the right. Economics has no political party and no constituents which mean that sometimes doing what’s best for the economy will run counter to political ideology. Unfortunately our current political system is set up to value ideology over reality. Placing deficit reduction over job creation is a clear example of this and in the end it will be the American public that suffers from this political demagoguery.