We're going the wrong way!

For the first time since 2009, the U.S. economy shrank last quarter. New numbers out of the Commerce Department, show that the economy shrank in the fourth quarter of 2012 by point-1 percent. That’s a complete reversal from the robust 3.1% growth rate, which we saw in the third quarter of 2012.

What’s behind the sudden drop? Conservative austerity spending cuts. Federal spending was down 15% in the fourth quarter, after rising 9.5% in the third quarter. And as we’re seeing in the UK, which is on the verge of entering a triple-dip recession – Greece, which is on the verge of total collapse – and Spain, which has the highest unemployment rate in Europe – austerity kills economies.

But thanks to Republican hostage-taking, and demands for more and more spending cuts – the United States is about to enter this same austerity death spiral in 2013. Already – the US is scheduled to enact austerity measures totaling 2.1% of GDP – which is more austerity than the U.K., France, and Spain have enacted thus far. And with even bigger spending cuts looming in a few months, it’s only going to get worse.

We need pro-growth policies, that put money back in the hands of working people. Spending cuts don’t do that. And no nation, in the history of the world, has ever cut its way to prosperity.


Larry.Pius's picture
Larry.Pius 11 years 20 weeks ago

CAMPAIGN FINANCE REFORM - We must divert ALL of our efforts into achieving public funding of elections, NOW, NOW, NOW. NOTHING of any real consequence will happen in this country unless and until this happens as evidenced by the recent filibuster reform debacle.

Namaimo's picture
Namaimo 11 years 20 weeks ago

Austerity is being used as a tool by the "neo-liberals" (who are NOT liberal) to depress economies that have (or used to have) strong social safety nets --good education, universal healthcare, solid pensions and strong unions, acquired with great effort during the 1930s -- which the "neo-liberals" around the developed world are trying to dismantle. The same scenarios are being observed in Australia, France, Canada (!), which is to plead "we're broke" by governments, even "socialist" governments, after purposefully taking measures to enrich the rich, plundering the natural resources, cutting jobs, and glorifying "the free-market" and the big banks.

We need to organize ourselves from scratch at the local level, into cooperatives. Cut out the greedy middle "men", and share modest profits among ourselves. It's happening!


ScottFromOz 11 years 20 weeks ago

Larry Pius: +230,000,000 (or $6B whichever you prefer)

The Conservative "trickle down" ideology hasn't done what they said it would do. Instead it has turned into a massive "flood upward". Unfortunately to change the policy direction will require a lot of politicians who voted for and enacted these policies, to admit that they were wrong. Anyone who has experienced the full glare of a politician's ego up close, will know that admitting a mistake or wrong policy choices is something VERY few politicians would ever do. Very few politicians have the integrity or strength of character required to do this. The ONLY way we'll see a change of policy direction is through generational change of representatives or some kind of political purge of the old guard. It will also require voters to actively think about issues and not just accept the Fox News (read corporate) propaganda. Given the popularity of the right-wing shock jocks and other hate and fear mongering media, I'm not optimistic.

HalFonts's picture
HalFonts 11 years 20 weeks ago


I absolutely agree. This is my only issue because mega-money corrupts ALL other government, political and social-issues. And yet almost nobody is doing much about getting this scourge on democracy under control. Certainly the major political groups are doing nothing -- they're making out like bandits, feeding out of the $-Billion or so raised during last year's campaign.

They're doing nothing other than continuing to fill my In-box every-day, panhandling for spare-change. Sorry guys; but while I supported this last election, I just can't keep paying folks who were elected to do a job, or various campaigns every week or month, now -- to simply do their job.

Worse yet, some of the Mega-Million-PACs and Funds are now supporting paid professionals, working right now to corrupt and destroy our basic freedoms and democracitic systems -- while our "world's biggest military" can do nothing about it -- do nothing but in-fact support it.

Wake-up, folks. The Corporations and the Mega-Rich can somehow find ways to write-off the value of their "contributions" (investments). We of the 98% have to dig into our monthly budgets or our savings for the future. From now on, the vast majority of any of my contributions will only be to Financial Reform or specific un-addressed issues.


Mark_Pash's picture
Mark_Pash 11 years 20 weeks ago

The current fiscal debate is hiding the fact that it was not the cause, therefore, NOT the solution to the Great Recession. The monetary-financial system crashed the economy causing the taxe revenues to go down and the safety net expenses to go up. Almost every gov't involved in the sub prime fiasco went into deficit. Cutting taxes and increasing spending is only a temporary and partial solution.

The economy is starving for money! Trillions of debt has been paid off since the crisis reducing the supply in cirulation. Banks with their fractional reserve banking and narrow lending can not put enough money back into circulation. We need complete monetary reform by eliminating fractional reserve banking and the creation of money by debt only! We need to subtantially increase the diversity of distribution of new money and take the creation process out of the bankers hands into a transparent democracy. It worked for the Colonists both before and during the Revolutionary War and again for Lincoln during the Civil War with the Greenbacks.

The complete answer is in the "Monetary Reform-The Big One" Section on the right side of our site at www.cpe.us.com

Center for Progressive Economics

Gary Reber's picture
Gary Reber 11 years 20 weeks ago

Just think about it. With government defense spending and the make-work associated with the military-industrial complex, the economy would have grown AT A PUNY 1.27 percent pace! At below 10 percent growth rates there is NO WAY that the United States will ever by able to eliminate deficits and substantially pay down the national debt while maintaining social programs supported by tax extraction and further incurring national debt.

The military-industrial complex of subsidized private sector contractors and a war machine far greater than the combined military expenditures of the other countries in the world is a primary reason the American economy is chugging along, even at such a slow pace. Instead of over-subsidizing wasteful military expenditures we need to reform the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. Such productive capital investment should be to produce REAL products and services that society needs and wants, while ensuring that through full-payout dividend income the new FUTURE owners will have income to engage in the economy as "customers with money."

The solution to broadening private, individual ownership of America's future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks "too big to fail" and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or "CHA" (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. As well national debt needs to be focused on growing the private sector of the economy simultaneously with facilitating private, individual ownership of FUTURE productive capital formation. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become "customers with money." The proposed Capital Homestead Act would produce this result.

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

Such policies will address our greatest problem, that being most Americans are not earning enough income to properly support themselves and their families. The country is experiencing a widening divide between an elite income class with well-paid salaries and dividend and capital gain income from stock ownership and low-pay wage earners and those dependent on taxpayer-supported government welfare funded by extracting taxes and incurring national debt. This situation will continue to worsen. Americans need to WAKE UP and realize that the FUTURE is one of technological unemployment. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. And as a result, most American incomes will decline, which will result in a downturn in the economy as there will be fewer and fewer "customers with money" to purchase the products and services society needs and wants. The result: no or significantly reduced opportunity for income.

This is the NEW REALITY! The obvious, logical solution is for people to OWN THE MACHINES and non-human means of production that result from technology.

This new reality is the result of technological innovation and invention, tectonic shifts in the technologies of production, and an obsolete union movement stuck in job creation and "more pay for less work" instead of bargaining for employee ownership and increased incomes resulting from dividends earned as stock owners in corporate America.

This can be accomplished by applying the logic of corporate finance, which is self-financing and asset-backed credit for productive uses to grow the economy. People invest in capital ownership on the basis that the investment will pay for itself.

The solution is not a focus on JOB CREATION but a focus on OWNERSHIP CREATION whereby EVERY American can acquire private, individual ownership in FUTURE income-producing productive capital investment without the need to limit the financing to past savings and/or requiring workers to reduce their consumption incomes to become owners.

There is a solution. The Just Third Way Master Plan for America's future is published at http://foreconomicjustice.org/?p=5797.

The fundamental economic solution is to create income for EVERY American by simultaneously broadening private, individual ownership of FUTURE productive capital economic growth and fully paying the profit dividends to the new American owners of the income-producing capital assets of our corporations.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

2950-10K's picture
2950-10K 11 years 20 weeks ago

Pro-growth policies, the kind that require the top 1% to pay their fair share of taxes, the kind that promote strong labor unions, strong social insurance programs, and in general the kind that make the vast majority of the electorate realize that our Democratic Progressive Representatives are the only ones without their heads up their whatever...... which is precisely why Republicans are pushing austerity economics.

It's all just a left wing hoax, Upstate NY, thunderstorms last night, over 60 degrees today, and had a wonderful run in my shorts and t-shirt tonight.

Colvin's picture
Colvin 11 years 20 weeks ago

We need sweeping reform across the spectrum. From publicly funded campaigns for all federal and state elections, to wall street and the financial sector. Wall street should be an effect instead of a cause. Long term investing should be encouraged over short term investing. FIAT money has to be replaced with a gold/silver/platinum backed money. The wealthy need to be systematically stripped of their power and ability to influence our government. Our TV Radio and news papers need to be stripped from the mega corporations with interests which oppose the good of the people. Our education system needs to be completely rebuilt from the ground up, from a high drop-out rate barely functioning system to a system that churns out educated work ready adults out of high school. Our military system depends on defense contractors that don't get the job by being the best, or the best for the money, but by hiring ex-politicians and lobbying.

We should not strip our Billionaires and Millionaires of their wealth and re-distribute it. However we should relax our protection of them when it comes time for them to reap what the've sewn. We should strip them of their right to do business if they do not do business in the best interest of the people.

A start would be to revoke Wal Mart's corporate charter.

megalomaniac's picture
megalomaniac 11 years 20 weeks ago

Many years ago Fox News vehemently argued with the critics about the American economy being good all the while President Bush was in Office until the final days before the change of command. Especially then Vice President Dick Cheney acclaimed that deficits don’t matter. Plus Henry Paulson handed off a three page summary of the economy in free fall. You can picture all the business friends parachuting in free fall holding on their ripcord called the Federal Reserve.

Many likely remember Hannity of Fox News in raving rants discounting anyone who knocked the economy while Bush held office. More over America’s first fiscal cliff was handed off to President Obama from Bush and his treasury chief secretary Henry Paulson.

After reflecting on the history here, America’s new president, Obama received a summary of the treasuries damage, President Obama started to learn what bail is really fast. Now the party of no regulation, hands off the too big to fail economy, or better put the biggest one shot piece of regulation stroking president Obama’s back end while laughing as they vanish like a mysterious derivative. This has to be the best failure any political party could deliver to the American people. Henry Paulson essentially saying, “you gota due some regulation or America goes to hell”. The kicker is that stimulation program called tarp was the first step in America’s on going “Fiscal Cliff”, really a stair way down the economic rat hole. Just how many steps to go, so two steps are behind America.

Gee that security market looks nice and fat now get ready here is the next step. My clue is when Mitch Mcconnell pulled out his diagrams. He dredged up something colorful and glitzy but it looked like a part of his up side down world to me.

akunard's picture
akunard 11 years 20 weeks ago

The Fed has printed 1 Trillion $'s a year and yes the Republican's ASKED for spending cuts but they didn't get any! We have taxed the rich. The middle class is where the money is and they are next.

Obama owns this econemy NOT BUSH!

Thom you know all this so cut the CRAP!

Mark Saulys's picture
Mark Saulys 11 years 20 weeks ago

Defense contractors don't create many jobs because, as we know from listening to Thom's programs, defense manufacturing is capital intensive, i.e., it is high technology and low on labor. It serves only to enrich contractors. For "make work" what is needed is high labor, low technology production..

Mark Saulys's picture
Mark Saulys 11 years 20 weeks ago

Akunard, get your $20 but you're not contributing to the discussion. When have we last taxed the rich? In the Clinton era. Spending cuts have continued to advance. Your statement that the GOP has asked for spending cuts but didn't get them is false, willfully so, not unlikely.

Obama is the president, not the king. The actions and inactions of Congress are as - if not more - significant to the well being of the economy.

Get your $20 but you don't fool anybody here.

Mark Saulys's picture
Mark Saulys 11 years 20 weeks ago

Content deleted.

Mark Saulys's picture
Mark Saulys 11 years 20 weeks ago

Before Citizens United struck them down Arizona and Maine had laws that made publicly financed campaigns and the legislators from those states said that it took them less than 5 minutes to get from their cars to their offices or the chamber because the lobbyists knew which legislators were from states with publicly financed campaigns and would and would avoid those. Legislators from other states, however, would take at least a half an hour to get anywhere from their cars as the lobbyists would always mob them.

Palindromedary's picture
Palindromedary 11 years 20 weeks ago
Quote Colvin:...revoke Wal Mart's corporate charter.
What?... and force us poor people to shop at all those other more expensive businesses? I'd expect most merchants, who may have been voting Republican all these years, making corporations like WalMart possible, would be the most for getting rid of WalMart. I will continue shopping at WalMart as long as I can get a good price...better than anywhere else...and teach all of those Republican businessmen a lesson. If we can teach them a lesson (although I doubt it...they'll continue to try to get people to shop at their stores and not at WalMart) then maybe they will have to stop bribing politicians to create laws that favor that kind of greedy behavior. And if people stop shopping at WalMart, then those who created all the right-wing greedy capitalist policies over the years (all the Republican businessmen) won't be hurt a bit. We will have saved them from their own piggishness.

SteveS's picture
SteveS 11 years 20 weeks ago

No one should be surprised. We are going the way of Spain, and we've seen this before in Greece, Japan, Great Britain, etc. Austerity breeds economic stagnation and misery. Paul Krugman and Robert Reich should be heading Obama's economic team, but the President is foolishly sticking with people who are part of the old-guard establishment, the monied interests. I have always contributed to progressive causes--environmental groups, political groups, anti-war groups--but now there's talk of cutting Social Security and Medicare. Being a retiree (who, by the way, is now paying for some expensive medicines), I'm cutting way back on these donations until I learn if another "grand bargain" is in the works. Retirees like me will stop spending on anything except necessities. I have sent many emails to Obama about this matter, but if the White House responds at all, it's with a rehashing of the same old, vague campaign position statements. Frustrated in Wisconsin!

akelous's picture
akelous 11 years 20 weeks ago

I think the first issue of reform has to be getting money out of American politics. This will not be easy. The monied will fight tooth and nail but until we get this done our every effort to make progress on any issue will be subverted by their interest. While they control politics we cannot implement any solutions for climate change, gun control or anything else unless they will profit and we need solutions that address the problems, not profits.

Palindromedary's picture
Palindromedary 11 years 20 weeks ago

The President has two main governmental financial responsibilities:
1. Collect taxes
2. Spend taxes to run the government
This might make some people think the President is all powerful when the President submits the new budget. But, the reality is just the opposite. It is the Congress that has these responsibilities.
It is the Congress that:
1. Sets taxes.
2. Determines spending by writing a budget

The President does submit a budget to Congress and asks for changes, but these are just requests that the Congress doesn't have to pay attention to. They can add or subtract anything...or throw it out entirely...and write a new one. Congress decides on everything they want, including all of the pork they sneak in, and approves their version of the budget.

The President is required, by law, to spend that money as set forth by the Congress. As long as more taxes come in than goes out, then everything is just dandy. But, almost always Congress puts more stuff in the budget than what comes in as taxes...which means that the President must borrow the money to cover the difference. But Congress also limits the total amount of debt that the US can have. The Congress-mandated budget must be spent...and the President is legally mandated to spend it. But since Congress created the 'debt limit' they also prevent the President from borrowing more than the limits Congress decides. The 'debt limit' may initially sound like a good idea until we examine the consequences of the interaction of these two branches of government. As the total amount borrowed approaches the debt limit...Congress acts "shocked!" that we are approaching the debt limit..and something drastic has to be done. They call it the 'debt bomb" or the "fiscal cliff". All theatrics to scare and confuse the people...the potential voters. They try to blame it on the President for being careless.

While it is technically correct that it was the President who borrowed all that money...it was the Congress that forced him to do it. The President is legally obligated to spend what Congress set forth in their budget. The debt limit is not about future spending or a credit card..it is to pay off all of those businesses and people who the government owed money to. It is about paying the bills already incurred.

The Congress, after going through all of this Chicken Little- the sky is falling histrionics...all done for political manipulation..always raises the debt limit and has done so many, many times...especially during the Bush administration. Why does this debt limit debate last months? Because of politics! Congress loves the Debt Limit because:
1. It Creates a problem that...
2. Congress can blame on the President who...
3. Needs the solution that only the Congress can provide.
Congress can use the threat of 'mutual financial self destruction' as leverage in the negotiations that they benefit from extending until the last second.

The debt limit explained...

DAnneMarc's picture
DAnneMarc 11 years 20 weeks ago

BRAVO PALINDROMEDARY! Wonderful how you broke that down into nice bite size chunks. Yummy! Of course it begs the question, "Just how stupid do they think we are--playing this same song and dance over and over with the same choreography?"

One might think, "Fool me once, shame on you! Fool me twice... We don't get fooled again!"

What's it gonna take for Obama to exercise his option to overrule this nonsense with an Executive Order? His response to gun violence certainly shows he's not afraid to use that power.

Is he a fool, a tool, or part of the dance?

Palindromedary's picture
Palindromedary 11 years 20 weeks ago
Quote DAnneMarc: "Is he a fool, too, or part of the dance?"

Good question! Sometimes, it seems like he is playing all three parts. And if he didn't play at least one or the other how long would it be before someone from the grassy knoll gets an itchy trigger finger? Lots of money from a revolving door may seem better than a revolver pointed at his head.

DAnneMarc's picture
DAnneMarc 11 years 20 weeks ago

Good point Palindromedary! In fact, your reasoning again reminds me of the plot of Blazing Saddles, when Cleavon Little rides into the City of Rockridge for the first time and starts to officially declare himself Sharif, everyone in town takes out a revolver, or shot gun, and aims it at his head. Finally, he pulls out his own pistol and aims it at his own head too and threatens everyone else that he'll shoot himself if they don't put their guns away. Then he says, "Please, do what he say." Then the whole town drops their weapons and Little escapes. I'll never forget the last words of the town people, "Everybody listen, he's just crazy enough to do it.", and, "Oh, won't somebody help that poor man?" (If you haven't already, you simply must see Blazing Saddles.)

I often think about that movie every time I think about The Obama Administration. I can't help but wonder if there is the slightest chance that the bad guys are getting played. However, I can't help but feel that it is you and I who are getting the business. If you know what I mean?

"Mongo, is but pawn in game of life!"

DAnneMarc's picture
DAnneMarc 11 years 20 weeks ago

Halfonts Wrote: "From now on, the vast majority of any of my contributions will only be to Financial Reform or specific un-addressed issues."

Thanks Halfonts, Brilliant advice. Thought it deserved repeating.

nora's picture
nora 11 years 20 weeks ago

The One Percenters are impoverishing The People of the USA.

AUSTERITY is just a cover word for IMPOVERISHMENT!

I'm really sensitized to the the BIGOTRY of The Super Rich against The Impoverished. The Super Rich's bigotry ran the world before the application of egalitarian principles and is trying to return the world to a globalized feudal system now. Unacceptable!

Thom's Blog Is On the Move

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