Wednesday, May 11, 2011

Speaker Boehner Claims Crowding-Out

John Boehner addressed the Economic Club of New York on May 9 claiming the recent fiscal stimulus actually hurt job creation:

The massive borrowing and spending by the Treasury Department crowded out private investment by American businesses of all sizes.

James Rowley and Mike Dorning of Bloomberg report that Boehner’s claim has been contradicted:

House Speaker John Boehner, giving Wall Street leaders his prescriptions for growing the U.S. economy and reducing the nation’s debt, built his case on several assertions that are contradicted by market indicators and government reports ... Boehner’s statement in his Wall Street speech that government spending “is crowding out private investment and threatening the availability of capital” runs counter to the behavior of credit markets. “Look at interest rates. Look at capital spending,” said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado. “It’s very hard to come to a conclusion that there’s any kind of crowding out.” The cost of borrowing is low by historical standards. Yields on 10-year Treasury notes were 3.21 percent and yields on 2-year Treasury notes were 0.59 percent at 5 p.m. in New York yesterday, according to Bloomberg Data. Average spreads on investment-grade corporate bonds have narrowed from 1.64 a year ago to 1.39 on May 9, according to Barclays Capital.

It is nice to see real reporting on economic issues and the claims of certain politicians!

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