It doesn't make sense to ask everyone to sacrifice when the top 1 percent has captured 93 percent of the country's income growth as it did in 2010. It makes no sense to cut spending on everything when long-term deficits are driven by one thing -- our broken health care system. And it makes no sense to cut everything without being clear about what we need to build.
Bob Borosage has an
important piece up at Huffpo to contextualize the way forward in fiscal negotiations.
Borosage argues that our focus needs to be on growing the economy. This is the most effective way to address the deficit. Conversely if you wreck the economy with austerity the deficit will grow.
(more below the fold)
Now we are already a long way down the rabbit hole when it comes to austerity. Brad Plummer over at Wonk Blog, says his back of the envelope calculation is that we have already enacted $304 billion in tax hikes and spending cuts or about 1.9% of GDP for the current year.
Britain has earned a lot of criticism for its austerity programs in the past two years. But at a total size of 1.5 and 1.6 percent of GDP, each of those two deficit-reduction years were smaller than what the United States is planning this year. The United States is also planning to cut and tax more heavily this year than Spain did in 2010 and 2011. Or France. That said, we’re nowhere near Greek or Portuguese or Irish levels of austerity.
Against this backdrop it is hard to envision where any funds to stimulate the economy, invest in infrastructure and education, or support the development of new industries and jobs would come from. Making more cuts won't help especially if they are unrelated to the real challenges we face (e.g. cutting social security). As Borosage puts it "you can't build by focusing on what to dismantle".
At the end of World War II, our debt burden was about 125 percent of GDP -- far higher than it is now. Yet our leaders were focused on how to put the GIs back to work and avoid a return to the Depression. So they enacted the GI bill to educate a generation. They subsidized housing and built the suburbs. They converted wartime industries to peacetime development. They launched the Marshall Plan to rebuild Europe and create markets. They built the interstate highway system to pave way for a national market. They fought over deficits and budgets, but they did what needed to be done. They thought and acted boldly. And they built the first broad middle class in the world's history that made America exceptional.
They fixed the economy. They generally ran deficits and added to the nominal debt. But the economy grew far faster and by 1980, the debt was down to below 40 percent of GDP and not a concern. They are remembered as the great generation. We might learn a thing or two from them.
Now we're never going to get anything that visionary enacted with this congress but nor are we doing ourselves any favors if we fail to keep the focus on jobs and the economy while putting all of our energy into playing defense on spending cuts.