Cut Government Spending! (Unless it Comes to Us)

Nelson Schwartz, on Sunday in the NY Times, had a most interesting article on big business cutting back on investment and hiring because of fears of the so-called “fiscal cliff,” the automatic enormous budget cuts and reversion to pre Bush tax rates if Congress cannot come to an agreement about trimming the deficit.  Of course this fiscal cliff was engineered by most of the same worthies now in Congress because they couldn’t agree a while back, apparently with the idea that time and dire threat would make them more reasonable down the road.

Not so.  Unreason has gripped the minds of a significant minority in Congress, and the minds of those who sent them there.

But on with the article.  At first glance it would seem that business reluctance to invest and spend is fear of ‘chaos.’  Mebe.  There’s also the issue of budget cuts.  That is, the Federal government will spend less.  On what? Blankets for the homeless?  No.  More to the point are the major purchases from these very, now skittish, companies — who have been funding the United States Chamber of Commerce and contributing to campaign funds all calling for smaller — that is, less spending– government.

The very scrawny chickens are coming home to roost.

The NY Times lead editorial on Monday, picked up on the problem:

 Republican lawmakers demanded the cuts last year as part of their brinkmanship over the debt ceiling, and business lobbies have generally supported slashing the deficit. But now that the cuts are imminent, corporate executives seem to have realized that the last thing the economy needs is a large budget cut across the board.

 

as did Duncan Black in his Atrios costume. 

Their waking up to worries about federal government spending cuts is not simply due to Keynesian concerns about aggregate demand and the potential for recession, but because they’re seeing their federal contract gravy train disappear.

[and if you want an explanation for “Glatian Overlords” in his piece, here is one. ]