For all the flinging of insults at those individuals in the blogosphere, with little relative power to influence either public opinion or public policy, for saying mean things about the President, to the extent that anyone is responsible for “ruining” Obama’s presidency, it’s his own economic political advisers, who have been prioritizing deficit reduction over economic recovery for the last six months, and whose policy prescriptions would doom any chance at a comeback in the medium term. Voter understanding of the economy is weak at best – heck, elite opinion-maker understanding of the economy is almost non-existent – but they generally take their cues from their own experience with the economy. If they’re able to find jobs, spend money, have a vacation and access to some luxuries every now and again, they will give the party in power high marks for their performance. If they see mass joblessness, a lack of increase in wages, creeping insecurity about their personal job positions or their retirement options, they will blame the government. It’s a pretty simple rule of thumb that has completely escaped the President’s political team, not his economic team.

I don’t know that you could make a blanket statement anymore that the economic advisers know best – economic advisers have made a habit of letting the nation down these days – but in a contest between the economic team and the political team, I’ll take the economic team most of the time. The public doesn’t rely on economic theory to shape their opinions, they rely on results. They can be told that deficits drove the recession or some other pabulum, but the greatest antidote to this fearmongering would be tangible improvements in their economic picture.

The most frustrating part about this is that not only would austerity budgeting, or even a lack of stimulus at this point, have the opposite effect in the near term, but there’s credible evidence that it would worsen the long-term deficit, precisely the problem that such actions are meant to solve.

Unemployment checks have the added benefit of helping these people feel like they’re still a part of the labor force. When the checks run out, and with few glimmers of hope in their job searches, they’re more likely to drop out of the labor force and turn to a program like disability.

And unlike a relatively short-term fling with jobless benefits, their attachment to disability is more likely to be permanent.

“Current program incentives make it highly likely that marginally qualified applicants drawn into the program by the business cycle will provide a long-term burden for the disability rolls even if business conditions Improve and the severity of the person’s disabling condition(s) does not worsen,” according to a 1995 study by Kalman Rupp and David Stapleton.

Other studies have shown that for each percentage point increase in the unemployment rate, disability rolls increase anywhere from 2% to 7%. Some studies show that effect grows larger in the following two years.

That’s just one consequence of not renewing unemployment benefits, for a small sector – the 50 and over crowd. In fact, austerity programs have a tendency to make the long-term budget outlook worse in the long term over a broader segment of the economy.

So here’s the outline. Suppose you slash spending equal to 1 percent of GDP. That looks like a budget saving, right? But if you do it in the face of an economy up against the zero bound, so that the Fed can’t offset the demand effects with lower rates, it’s going to shrink the economy [...]

The WSJ piece showed one example: workers driven permanently out of the labor force. There’s also the negative effect of a depressed economy on business investment. There’s the waste of talent because young people have their lifetime careers derailed. And so on. And here’s the thing: if the economy is weaker in the long run, this means less revenue, which offsets any savings from the initial austerity.

How big do these negative effects have to be to turn austerity into a net negative for the budget? Not very big. In my example, the real interest payments saved by a 1 percent of GDP austerity move are less than .02 percent of GDP; if the marginal tax effect of GDP is 0.25, that means that a reduction of future GDP by .08 percent is enough to swamp the alleged fiscal benefits. It’s not at all hard to imagine that happening.

In short, there’s a very good case to be made that austerity now isn’t just a bad idea because of its impact on the economy and the unemployed; it may well fail even at the task of helping the budget balance.

This is not to say that you can never cut budgets because they always increase deficits – this is not Laffer curve talk. It is the case that cutting budgets during an economic downturn, with no private investment to pick up the slack, and with monetary policy at the zero bound, does in fact worsen budgets. That’s just a mathematical reality.

And yet we have a White House political team putting into action a deficit-cutting strategy that will increase future deficits, and which does not speak to the concerns of the electorate, which are about economic performance. This passage from Ryan Grim’s excellent piece on the subject crystallizes the insanity at work:

The Obama political team’s focus on the deficit raises the question: Just who is this hypothetical midterm voter who was leaning to the GOP because of deficit concerns, but will vote Democratic if only Congress trims a spending bill from, say, $250 billion down to $80 billion? Most voters — and most reporters, for that matter — can’t guess within a few hundred billion what the budget deficit is, and would struggle to put a dollar figure on the latest jobs-bill proposal. So how is it, then, that a voter would cheer saving a few billion dollars by cutting off COBRA subsidies?