Yesterday the President made a claim that deficit reduction will enhance economic growth by providing confidence to the business community. Unfortunately, this “confidence is the cheapest stimulus” dodge has become all too familiar among leaders in the Democratic Party. In fact, it takes the politicians out of government, people like Ed Rendell, to tell the truth.

The blunt Pennsylvania Democrat has been one of the party’s most vocal advocates for strategic and continued government spending. On a conference call hosted by the Democratic National Committee, he castigated former Massachusetts Governor Mitt Romney for arguing that President Obama’s stimulus package hadn’t worked.

But in making the argument that government intervention was necessary a necessary prop for a weak economy, Rendell took a sideswipe at members of his own party. Asked whether he was worried that a debt deal that included $2.4 trillion in cuts — as envisioned by Republicans and Democrats — could result in a double-dip recession, he didn’t hold back.

“I think there is a danger in that. I think there is certainly a danger in that. I think the stimulus would have worked better had we invested more in development,” he said. “I’m very concerned that we are going down a path that will zero out investment in this country… If we continue to do that, if we don’t invest then we are going to become a second rate country, it is a road map for disaster.”

Telling the truth is a revolutionary act, and all that.

The facts bear out Rendell’s opinion. Near-term spending cuts will tank an economy that is already struggling. We’ve been at over 400,000 weekly first-time jobless claims for 12 weeks, and the slack in the labor market from May has tipped into June. In that environment, if you cut federal spending, contracting fiscal policy when there’s already a demand gap, people will be laid off from the cuts, or they will find less in the way of services. They will have to stretch their dollar and as a result they will spend less. This will begin a death spiral of more job loss, followed by more reductions in consumer spending.

I know that rich corporations apparently don’t need a middle class to make record profits, so maybe they don’t care about this. But the rest of us are not so lucky. And at the very least, you’d think the Democrats would have some self-preservation instinct. The above Web ad from Romney is as cynical as the rest of his campaign. He doesn’t have one idea that will put people back to work, as opposed to his multitude of ideas to expand corporate profits. But he doesn’t have to offer solutions if it’s a referendum on the economic performance of the executive. And that’s where we could be at next November.

That’s especially true if you contract during a jobs crisis. Whatever you gain tactically, you lose in tangible economic terms.

David Dayen

David Dayen

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