A follow-up on the prospect of a long, painful recovery of lost jobs.
Here is the latest projection from the Congressional Budget Office (CBO) of the gap between real GDP and real potential GDP (via Paul Krugman):
Potential GDP is a useful estimate of what the economy would be producing if it were not in a serious recession. The difference between potential and actual GDP is commonly known as the “output gap.”
Earlier this month, New York Senator Kirsten Gillibrand voted “no” on the budget/debt limit deal and said:
The fact is, there is nothing in this deal that will address the significant jobs crisis we are facing…. today we could have gone further in reducing America’s debt with a sensible compromise that both cut discretionary spending and raised revenues.
This was a gutsy decision, and Gillibrand has taken a lot flak from the usual right-wing bloviators. Only 6 Democrats voted against the deal (plus Vermont’s Bernie Sanders, an Independent). The rest of the 26 “no” votes were by Republicans who wanted more budget cuts which, by any credible logic, would cause more unemployment and lost jobs. Gillibrand is right about the jobs crisis outweighing debt concerns. Jobs are the immediate problem, while debt can and should be handled long-term.