More than 80 high-profile CEOs just penned a letter calling for deep budget cuts to avert to reduce the deficit, but hundreds of economists warned on Wednesday that such austerity measures are medieval medicine that will exacerbate the economy's underlying ailment: high unemployment.
On Wednesday, 350 economists, many left-leaning, signed a letter calling for "jobs and growth, not austerity." The letter, written by Robert Borosage and Roger Hickey, co-directors of the Institute for America's Future, and Robert Kuttner, founder of The American Prospect, emphasizes that mitigating long-term unemployment is the key to ensuring higher economic growth, lower unemployment and lower deficits.
"The budget hawks have the sequence backwards.... Budget cuts in a deep slump lead only to a deeper slump," the economists said. "We need jobs first. With recovery, deficit reduction will come of its own accord thanks to increased revenues in an improving economy."
Economists that signed the letter include Jared Bernstein, a former Obama economic adviser; Justin Wolfers, an economics professor at the University of Michigan; and former Labor Secretary Robert Reich. Paul Krugman's wife and collaborator Robin Wells signed the letter, but Krugman himself did not, even though he has made similar arguments in his pieces for The New York Times.
You can read the full letter and the names of the economists that signed it here.
The U.S. unemployment rate has been declining slowly, and it's generally recognized that it would be much lower now if it were not for government budget cuts. The unemployment rate, at 7.9 percent, is only 21 percent lower than its recession peak of 10.0 percent three years ago, according to the Bureau of Labor Statistics.
Austerity measures do not have a good track record as of late. As Greece has slashed its budget in exchange for bailout funding, its economy has collapsed, and its deficit continues to grow. In other countries in Europe, austerity measures also have led to high unemployment and higher deficits.