Madame Maddow Warns That Cutting Government Spending Means Money 'Taken Out of the Economy'

Don't you love it when left wingers reveal their actual views on economics?

Rachel Maddow, one of MSNBC's nightly Gang of Five, did this on her show Monday while talking with Chris Hayes of The Nation about Democrats and Republicans battling over the debt ceiling (video after page break) --

On the issue of the overall health of the economy right now, the prospect for a double-dip recession is not only real it is looming. What we just went through with the Great Recession was so traumatic to this economy that we're looking at a decade's long full recovery in terms of, it'll actually restructure the way the American economy is forever.

The Fed and the CBO are saying, as of last week, do not take any spending out of the economy right now. If you want to cut spending in the long run or think about something else, fine, worry about that and have deficit talks, but right now it is too fragile to do this. The Republicans' only demand is that money be taken out of the economy right now.

Got that? Cutting government spending constitutes money taken "out of the economy." Which it does, if one sees government spending as representing the economy as a whole -- and the higher as a portion of GDP, the better.

Maddow predictably gets it backward -- increasing government spending diverts money "out of the economy." True, much of it is filtered back through salaries for public workers and government contracts, but not until an inherently lethargic bureaucracy bites off a big chunk in the process.

Maddow also distorts where Republicans stand on the debt ceiling. Their "only" demand is not that "money be taken out of the economy right now," as she claims. (Again, just the opposite) They also demand that government not siphon more money "out of the economy" through stealth taxes on the most productive people in the country.

Jack Coleman
Liberated ex-liberal from the People's Republic of Massachusetts