PIMCO Co-Founder Bill Gross Thinks Budget Cuts Are Terrible Idea

Bill Gross, co-founded of investment management firm PIMCO, argues that Congress' focus on the deficit is a terrible, terrible idea. Gross sees the current focus on deficits as distracting from the real issue — that what the country needs now is large, government-funded fiscal stimulus. Deficits will have to wait, for now. Gross lays out his vision in a prospectus to clients, arguing that neither Republicans nor Democrats seem to grasp what needs to happen to get the economy moving forward. "Solutions from policymakers on the right or left, however, seem focused almost exclusively on rectifying or reducing our budget deficit as a panacea," Gross wrote. "While Democrats favor tax increases and mild adjustments to entitlements, Republicans pound the table for trillions of dollars of spending cuts and an axing of Obamacare," Gross added. "Both, however, somewhat mystifyingly, believe that balancing the budget will magically produce 20 million jobs over the next 10 years. President Obama's long-term budget makes just such a claim and Republican alternatives go many steps further. Former Governor Pawlenty of Minnesota might be the Republicans' extreme example, but his claim of 5% real growth based on tax cuts and entitlement reductions comes out of left field or perhaps the field of dreams. The United States has not had a sustained period of 5% real growth for nearly 60 years," Gross wrote. Where is Congress getting the idea that it can balance the budget and magically cure the economy? Perhaps Herbert Hoover is alive and well, after all? God help us if these two warring parties drive the nation into economic depression because they're too stupid to comprehend how money works, how debt works, and government's role in propping up a dying economy. "Fiscal balance alone will not likely produce 20 million jobs over the next decade. The move towards it, in fact, if implemented too quickly, could stultify economic growth. Fed Chairman Bernanke has said as much, suggesting the urgency of a congressional medium-term plan to reduce the deficit but that immediate cuts are self-defeating if they were to undercut the still-fragile economy," Gross wrote. What Congress and the President must do, immediately, is invest additional deficit spending into infrastructure, rebuilding whatever needs to be rebuilt across the country. "An infrastructure bank to fund badly needed reconstruction projects is a commonly accepted idea, despite the limitations of the original "shovel-ready" stimulus program in 2009," Gross wrote. The government should take note: Bill Gross knows what he is talking about. When even hedge fund managers think the fiscally conservative vision for the near-term is foolish, perhaps it is time to put away our ideological measuring sticks and determine success in terms of the good produced for the country and the economy, and not what benefits our immediate political concerns.