Reprinted from Robert Reich’s blog. Please visit his blog for additional, timely economic articles.
Americans are deeply confused about why the economy is so bad – and their President isn’t telling them. In fact, the White House apparently has decided to join with Republicans and blame it on the long-term budget deficit.
Before I turn to the President, though, let’s be clear: The lousy economy is due to insufficient demand. Consumers – who are 70 percent of the economy — can’t and won’t buy because they’re running out of cash. They can’t borrow against homes that are worth a third less than they were five years ago, and most consumers are bad credit risks anyway because they’re losing their jobs and their wages are dropping. They also have to start saving for the kids’ college or for retirement, which will cut their spending even more.
Without enough consumers, businesses won’t hire enough people and pay them enough to reverse the vicious cycle. So we’re dead in the water. Even the stock market has caught on to the truth.
Which means government has to step in to boost the economy – as it has every time the economy has fallen into recession over the last eight downturns. Include the massive spending on World War II that lifted us out of the Great Depression, and it’s nine. The Fed can help, but it can’t do it alone. And it’s least helpful after a huge asset bubble has burst because the financial system won’t channel low interest rates where they’re most needed – to small businesses and average consumers.
This time we tried one stimulus that was way too small relative to the size of the falloff in demand that started in 2008 — especially given that states and locales cut their spending by almost as much as the federal government increased it.
So we need another – a bold jobs plan. (I’ve offered an outline of what it might look like in prior posts.)
Which gets me to the President. Even though the President’s two former top economic advisors (Larry Summers and Christy Roemer) have called for a major fiscal boost to the economy, the President has remained mum. Why?
I’m told White House political operatives are against a bold jobs plan. They believe the only jobs plan that could get through Congress would be so watered down as to have almost no impact by Election Day. They also worry the public wouldn’t understand how more government spending in the near term can be consistent with long-term deficit reduction. And they fear Republicans would use any such initiative to further bash Obama as a big spender.
So rather than fight for a bold jobs plan, the White House has apparently decided it’s politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama – to convince them their current economic woes have something to do with it, decry Washington’s paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia.
When I first heard this I didn’t want to believe it. But then I listened to the President’s statement yesterday in the midst of yesterday’s 634-point drop in the Dow.
At a time when the nation’s eyes were on him, seeking an answer to what was happening, he chose not to talk about the need for a bold jobs plan but to talk instead about the budget deficit – as if it were responsible for the terrible economy, including Wall Street’s plunge. He spoke of Standard & Poor’s decision to downgrade the nation’s debt as proof that Washington’s political paralysis over deficit reduction “could do enormous damage to our economy and the world’s,” and said the nation could reduce its deficit and jump-start the economy if there was “political will in Washington.”
The President then called upon the nation’s political leadership to stop “drawing lines in the sand.” The lines were obviously Republicans’ insistence on cutting entitlements and enacting a balanced-budget amendment while refusing to raise taxes on the rich, and the Democrats’ insistence on tax increases on the rich while refusing to cut entitlements.
These partisan “lines in the sand” are irrelevant to the current crisis. They’re not even relevant to the budget standoff now that Congress and the President have agreed to a process that postpones the next round of debt-ceiling chicken until after the election.
But that process itself will offer enough distraction over coming months to let the White House avoid coming up with a bold jobs plan – even if the nation succumbs to a double dip.
The drama continues this week and next as congressional leaders decide on their “super committee” of 12 lawmakers (six from each party). It then runs for another three months as the super committee decides on $1.5 trillion of proposed cuts, culminating in a tumultuous December when Congress votes on the package. Then we’ll have more drama if, as seems likely, Congress votes it down and the budget triggers go into effect – cutting sharply into defense and Medicare. But this stage won’t require any new decisions from Congress or the White House because the cuts happen automatically.
After that, we’re deep into campaign season and very possibly a double dip recession. Republicans will blame “big government” and the President and Democrats will blame Republican intransigence over the budget.
During yesterday’s pep talk, Obama restated his small-bore calls for extending a payroll tax cut that expires at the end of the year, extending unemployment insurance benefits, and creating an ill-defined “infrastructure bank” to create construction jobs. But these policy miniatures were added as a postscript to the debt talk, as if he felt obligated to mention jobs.
There’s still time for political operatives in the White House – and the person they work for – to change their minds. If economic stresses increase, Americans may insist on government doing more. A CNN poll released Monday found 60% believe the nation remains in an economic downturn and conditions are worsening. Only 36% believed that in April.
But for now the President is being badly advised. The magnitude of the current jobs and growth crisis demands a boldness and urgency that’s utterly lacking. As the President continues to wallow in the quagmire of long-term debt reduction, Congress is on summer recess and the rest of Washington is asleep.
The President should present a bold plan, summon lawmakers back to Washington to pass it, and, if they don’t, vow to fight for it right up through Election Day.
Another compromise
Tags: congress, economy, employment, jobs, long term unemployed, Obama, unemployed, unemployment
The following is a reprint of an excellent article from The Economic Populist.
Let the word go forth from Washington! The corporate rulers occupying our nation’s capital have declared war on just about every citizen.
Have no doubt: those in the upper ranges of the top 1% of wealth in this country (aka The Money Party) want to kick you to the curb.
They want to reduce your social security and make you go broke paying for medical care.
They want to lower your wages and trash your retirement.
They ignore the clear facts that we’ve had negative job growth since 2000 and the situation is just getting worse.
They want to ship jobs, factories, and entire businesses overseas and give companies that do that a big fat tax credit for doing so.
They’ve been given so much for nothing for so long. Now, they’re ready to take it all. It’s their time!
The most recent assault is the ridiculous debate about raising the debt ceiling. There should be no debate. Failing to raise the ceiling right now means deliberate default on debts, refusing to pay bills the government can pay. It’s called fraud.
The pressing need to fix the budget is a separate issue. Reduced spending and increased revenues should come through broad public involvement and open debate. It mandates that the rulers behave like adults.
But this crisis isn’t about putting together a real budget. It’s about creating a budget that punishes you, your family, and friends. It’s about taking your attention away from your vital interests to maximize income and control by The Money Party.
Were the leaders on either side of the debate serious, the Bush era tax cuts would be rescinded. These cuts on the top 1% were temporary. Guess what? Congress lied. When the temporary tax breaks ran out a few months ago, they were revived and renewed just when we had the greatest need for revenues.
The Money Party won’t give up its wars either. Iraq and Afghanistan have added $4 trillion to the national debt of $14 trillion. Why not stop the wars? How hard is that to figure that out?
Getting rid of Bush tax cuts for the super-rich, ending the wars, and moving out of the recession/depression would be huge steps towardbalancing the budget. But that won’t happen with this Congress and this president. Why? That would cost the financial elite money for taxes and lost income for all those weapons they sell to support the wars.
The Attack on You Began in Earnest Just Years Ago
Congress repealed Depression era banking regulation that kept your banks from risky investments in 1999.
Congress enacted legislation in 2000 that allowed extremely risky investments in real estate and other derivatives, illegal for nearly a century.
In 2001, the big banks and Wall Street celebrated its newly purchased freedoms with a decade-long binge of fraud and risky investments. Like a greedy con artist, they took everything they could from people here and around the world until there was no more to take. We have now hit the wall thanks to them.
The outrageous expenses of wars based on lies caught up with us and shoved the deficit to new heights. The tax cuts for the top 1% took away revenues needed to balance the budget.
The money they steal from the Social Security surplus is no longer enough. They want to keep the tax in place for us and take an even bigger rake-off.
This crisis is manufactured by the ongoing greed of The Money Party. It is funded by the US Treasury. You pay for it, all of it.
End
That was an excellent recap by Michael Collins of The Economic Populist. You can read this article at http://www.economicpopulist.org/content/war-you and many other fine articles at The Economic Populist.
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