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Sunday, May 15, 2011

Government costing jobs? Really?

MarketWatch has an interesting article ("Follow the money, Mr. Speaker") that concerns a question I've had for some time. You may have noticed that the last couple of years we've heard a refrain from Republican leaders and pundits that speaks to the issue of large government deficits costing jobs, because (in the words of John Boehner, House Speaker), "The massive borrowing and spending by the Treasury Department crowded out private investment by American businesses of all sizes."

But is this true? My initial reaction to this sort of thinking was that of course it wasn't. We'd have heard of this before now. This seemed some sort of catchphrase that someone in the media felt was pithy and could knock the democrats out.

Rex Nutting, MarketWatch's commentary editor, checked into this and found that indeed there was no truth to the claim. But don't expect the Republican's to stop just because it isn't true; it's just too good a phrase: it sounds true so they'll use it.

The proof that it isn't true comes from the low borrowing rates currently available. So there is no trouble borrowing by business. Also business is currently struggling because of low demand, not high borrowing rates (there are no high rates). Mr Nutting also makes it clear that businesses have so much money in their coffers that they would not even need to borrow. They could pay cash outright for more capital spending. He also states that businesses are currently spending quite a lot ($1.14 trillion annually), 25% more than in 2009.

But the real message is that the Republicans feel they can lie their way into the White House and Senate. They will just keep saying the same thing over and over until people believe it.

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