We are enduring one of the slowest economic recoveries in recent history, and the pace can be entirely explained by the fiscal austerity imposed by Republican members of Congress and also legislators and governors at the state level.
EPI’s Josh Bivens examines the reasons beyond our slow economic recovery (one that has progressively slowed with each recession).
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. 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.
The question of why the economic recovery has been so tepid is a vital part of the presidential election discourse. Clinton says she will increase employment through a public investment program. Trump says he will cut taxes to spark employment growth (and further limit spending).
Bivens argues that it’s federal policymakers who are most to blame, since structurally only the federal government can maintain spending levels in the face of revenue declines (through monetary policy and debt increases). State and local governments lack these tools (with some caveats around borrowing). But I think this lets state and local officials off too easily; many of them also embraced austerity as reason for pushing through tax cuts that will be almost impossible to reverse. And state lawmakers (which control the revenue options available to cities) lacked the courage to grapple with structural fiscal issues that each recession has made progressively stark.