"Pelosi warns of history repeating itself ‘if we pull our punch’ on job creation."
With the unemployment rate above 10 percent and states across the country facing budget shortfalls, Democrats in Congress are looking at various measures to spur job creation. At the same time, though, deficit-mania has infected the political world, including the White House, which is reportedly going to “focus extensively on cutting the federal deficit in 2010.” On a conference call today, House Speaker Nancy Pelosi (D-CA) explained how she plans to reconcile deficit complaints with the need to pass an adequate jobs bill:
We’re never going to decrease the deficit until we create jobs, bring revenue into the Treasury, stimulate the economy so we have growth. We have to shed any weakness that anybody may have about not wanting to be confrontational on this subject for fear that we’d be labeled not sensitive to the deficit. … The American people have an anger about the growth of the deficit because they’re not getting anything for it. … So if somebody has the idea that the percentage of GDP of what or national debt is will go up a bit, but they will now — and their neighbors and their children — will have jobs, I think they could absorb that. … If we pull our punch, as they did in the mid-30’s, we shouldn’t be surprised if history repeats itself.
During the Depression, President Roosevelt’s policies brought the unemployment rate down to 14 percent, from 24 percent, by 1937. But then, as Paul Krugman explained, Roosevelt “mistakenly heeded the advice of his own era’s deficit worriers. He sharply reduced government spending, among other things cutting the Works Progress Administration in half, and also raised taxes. The result was a severe recession, and a steep fall in private investment.” The Wonk Room has more.