NYT Pushes Non-Existent Signs of Recovery and Argues for Deficit Reduction

The NYT appears to be following the Washington Post's practice in running shrill calls for deficit reduction as news stories. Today the NYT tells readers that: "yet cautious signs of an economic recovery, which the White House takes as vindication, actually make the strategy [delaying measures to reduce the deficit] harder to maintain." The statement about signs of recovery are bizarre given that most economists finally recognize that the unemployment rate will cross 10 percent in the next few months and is virtually certain to remain above 10 percent for most or all of 2010.

Deficit reduction in this context would simply raise unemployment further. In addition, it would reduce spending on physical and social infrastructure, increasing the burden on future generations by lowering the economy's productive capacity.

The article also wrongly asserts that the United States needs to keep borrowing trillions of dollars from foreign investors. If foreign investors stopped lending the United States money, then the dollar would fall in value against other currencies, thereby making our exports more competitive in international markets and imports more expensive in the United States. The resulting improvement in our trade balance would give the economy a substantial boost. (Ostensibly, both the Bush and Obama administration had been lobbying China to stop investing in the United States, since this is how it "manipulates" its currency.)

--Dean Baker