BEIJING — President Barack Obama says he's worried that spending too much money to help revive the economy could undermine a fragile U.S. recovery and throw the economy into a double-dip recession. That's when the economy begins to recover briefly from a recession only to be dragged back under.Further spending will increase the deficit somewhat, but would that really cause the recession to worsen? If stimulus creates new jobs (or spares existing jobs), there will be more taxpayers. As one economist has put it: more taxpayers means more people paying down the debt. The article continues:
Obama told Fox News in an interview Wednesday that his administration is weighing tax breaks that could encourage businesses to begin hiring again.Is Obama talking to a Fox News reporter or channeling Fox News? The problem with proposing "tax breaks" is that your business only pays taxes if it makes a profit. Struggling small businesses are not helped by tax cuts during a recession. They need access to capital: banks willing to loan them money. AP continues:
But he added that it's important to recognize that if the nation keeps adding to deficit spending through tax cuts or more stimulus spending, at some point people could lose confidence in the U.S. economy and that could "lead to a double-dip recession."Who are these "people" of such shaky "confidence"? Might he be referring to investors? The Chinese? I am reminded of what Krugman recently wrote in a NY Times op/ed:
Unfortunately, the Chinese don’t seem to get it: rather than face up to the need to change their currency policy, they’ve taken to lecturing the United States, telling us to raise interest rates and curb fiscal deficits — that is, to make our unemployment problem even worse.It seems Obama wasn't only telling Fox News viewers what they want to hear, he was also agreeing to do what the Chinese have been telling the Americans to do. Evidently, Beijing doesn't care how many more Americans lose their jobs any more than Wall Street. China just wanted the equivalent of a very deep bow. And they got it.
And I’m not sure the Obama administration gets it, either.
* Fallows has a made list of various joint initiatives relating to the environment. He says it remains to be seen "which ones are serious, which ones are for show."