Increased Government Spending Has Republicans In A Panic

This is quite possibly the single worst piece of news Republicans could receive starting the new year:

NAPLES, Fla. — For a long stretch, government spending cutbacks at all levels were a substantial drag on economic growth. Now, finally, relief is in sight.

For the first time since 2011, local, state and federal governments are providing a small but significant increase to prosperity.

Math isn’t really that hard: Government spending is a boost to the economy. Everyone knows this, including Republicans. How do we know they know this? Because in just about every recession for the past 50 years, presidents from both parties have increased the government payroll to compensate. Eisenhower did it. Reagan did it. Clinton did it. George W. Bush certainly did it, even as he was slashing taxes for the wealthy.

But under Obama, the government payroll shrunk. A lot.

This, of course, was by design. Republicans conveniently found (Republican) Jesus on deficits and went on a holy crusade to cut the “out of control” government spending they spent the previous 8 years letting get out of control in the first place. Instead of expanding the government payroll to absorb the increased number of jobless Americans, Republicans forced “austerity lite” on us.

Republicans “suddenly” decided that infrastructure spending was bad bad BAD! Before now, every politician loved loved LOVED spending money on building bridges and repairing roads. All that juicy government money gets pumped directly into the local economy and those jobs can’t be outsourced. Republicans cut that spending to the bone.

They also kept the federal government from “bailing out” states and cities who were forced to make massive cuts they wouldn’t normally have had to make. Many Republican governors even refused the Obamacare Medicaid expansion because of “tyranny” but, really, it was about increasing the economic burden on their states.

The result? The economy shed hundreds of thousands of public jobs even as the private sector enjoyed a record-breaking 57 months of job growth. This drag kept the economy from growing at a more rapid pace. Again, this was by design. If you’ll recall, the entire GOP economic playbook has been to demand “Where are the jobs?” while aggressively attacking economic growth.

But, there comes a tipping point where steady, if sluggish, growth starts to accelerate. And it appears we’ve finally started to see the effects:

Federal spending for repair and construction of roads, schools and hospitals is increasing. Medicare and Social Security spending is rising, too, though at a comparatively modest rate, mostly because the previously relentless rise in overall health care spending has markedly slowed. Looking ahead, some economists are counting on spending on infrastructure and other capital investments to help nudge the economy ahead.

“That’s where the real momentum will be, longer term,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.

On the state level, signs of budget gaps and midyear budget cuts that were typical during the recession have diminished. Still, state revenue is creeping up, not booming, which translates to only incremental improvement.

So no, it’s not a “boom,” but increased revenue leads to increased spending which leads to greater economic growth which leads to increased revenue, etc., etc.

Last month, I wrote about an increase in average pay, a sign that the economy is heating up. Until now, wages have been stagnant meaning that people are working but their salaries have not been going up. Also, the GDP grew at an astounding 5% in the 4th quarter of 2014, the fastest growth since 2003.

All this means that we’ve probably reached the tipping point with regards to the state and city budgets as well. ANY growth is good at this point after years of ideologically driven cuts. Not every state will contribute to this growth, of course. Republican controlled states like Kansas and Arizona are economic disasters that are only getting worse following the GOP blueprint of “Tax cuts for the rich, a big middle finger to the rest of you!”

On top of this, the huge drop in oil prices will devastate several (mostly Republican controlled) states like Texas and Louisiana. Texas is especially important to watch because Republicans have long claimed that their policies have created the “Texas miracle” as opposed to Texas’ reliance on inflated oil prices for the last several years. It will be interesting to see how Republicans try to blame Obama for the coming Texas collapse even as the overall economy continues to accelerate.

The other thing to watch is how the new Republican controlled Congress tries to sabotage the economy. With Obama leaving the White house in 2016, Republicans won’t be able to rally the white supremacist vote as easily. Social wedge issues like marijuana legalization and marriage equality are total losers for conservatives at this point and abortion just isn’t enough to win a national election on.

Unless Republicans can cripple the recovery or somehow plunge us back into a recession, they won’t even have “Where are the jobs?” to campaign on.

The better the economy gets, the more Republicans are going to freak out and it’s only getting started.