California’s deficits are gone, and Republicans are furious. The national deficit problem is largely solved, too, and Republicans just don’t know what to do! Of course what we need to do is invest in modernizing our infrastructure, which will put people back to work and we will end up with a … wait for it … modernized, energy-efficient, 21st century infrastructure that will boost our economy.
Learn From California
In California Republicans caused the deficit with tax cuts and restrictions on democracy that prevented citizens from fixing problems. They blocked every attempt to help the economy and the state budgets, demanding only cuts — and more tax cuts for billionaires and corporations. But California’s citizens finally got them out of the way, elected Jerry Brown (again), elected a supermajority of Democrats, passed tax increases, and the budget is balanced and will be in surplus soon. Republicans can’t stand it. They have no more excuse to scream “crisis!” and call for cuts in the things California’s citizens do for each other and the state’s economy. Now alifornia is moving forward, and even building a high-speed rail system.
If this sounds strangely familiar there’s a national lesson to learn here.
What happened to jobs? The pubic wants government to do something about jobs and getting the economy moving, and in DC the only thing is this weird argument about … anything but jobs and getting the economy moving! “Fiscal cliff?” What about jobs? Fixing the economy will fix the debt, not the other way around.
Economic Storm Clouds
The economy is slowing, with signs of trouble on the horizon. Recent economic indicators are not so good. Trade deficits are huge, a bad manufacturing number this week, Europe still stagnant and slipping (because of austerity), China slowing. NY Times says, “Recent economic data “surprisingly weak,” and “recovery sputtering.” From Republicans Balk at Short-Term Stimulus in Obama Plan,
“As the debate rages in Washington, data has shown the recovery once again sputtering, with the underlying rate of growth too slow to bring down the unemployment rate by much and some of the economic momentum gained in the fall dissipating in the winter.”
It’s Demand Stupid
This slowing is not happening because people are “worried about the fiscal cliff.” It is because there are not enough jobs, and the wages of the people who do have jobs are stagnant with all the gains in the economy going to a very few at the very top of the economic ladder. Europe is slowing because they attacked deficits instead of hiring people to do jobs. We are slowing because the government stopped stimulus and started cutting.
The slowdown is because the jobs are not coming back fast enough, wages are stagnant and falling, and the government is not doing anything about it. And that means that there is not enough “demand” in the economy to cause investment and hiring.
Businesses want customers, not tax cuts — and certainly not cutbacks. In fact most of what DC is focused on — austerity — will make the situation worse, possibly even much worse, as it has done in Europe.
Small Stimulus In President’s Proposal
To his credit the President’s “fiscal cliff” proposal does contain a limited stimulus to help keep the economy moving, at least at its current slow pace. But we really need a massive investment in jobs. The President’s offer of $50 billion in stimulus for one year is insufficient, but at least it is something. The Republicans offer less than nothing, they want government efforts cut.
Jobs Fix Problems: The DC elite, major media and lobbying apparatus is focused like a laser beam on how much to cut, so the wealthy can have even more. But the public isn’t stupid, they get that there is a disconnect because they know that jobs fix problems, jobs fix deficits and lots of jobs fixes wage stagnation. Strong employment = wage growth. Strong wages = strong economic growth.
The People Spoke — The Election Was Supposed To Have Decided This
The election made it obvious, the public wants jobs, wants government services like Medicare and Social Security protected and even expanded, and more than anything wants taxes raised on the ultra-wealthy.
The election made the public’s wishes clear. But Washington continues to simply ignore what the public wants, and is focused like a laser beam on what a few billionaires want.
It was like there was an intense focus on the election, the public spoke, and then the very next day all attention shifted back away from what the public wanted and onto this austerity agenda that helps the billionaires at the expense of the rest of us.
A Government Of, By and For We, the People
I recently watched the PBS series The Dust Bowl. One thing that stood out was how the government actually cared about what was going on with the people, was trying to solve the problems, and how the people got it that the government was on their side.
Today it is a very different story, with the government isolated and largely under the control of wealthy and powerful interests. The current “fiscal cliff” absorption being only the most recent example.
The public doesn’t get what is going on in DC. They want JOBS first, they want the meager government services they do get preserved and even expanded. And they want a fix to the problem of the last few decades of wage stagnation, corporate domination, outsourcing manufacturing, deferring infrastructure maintenance, unionbusting, age discrimination, and cancelling TV shows everyone likes. (Just seeing if you are still reading.)
Economy Has Lots Of Jobs That Need Doing
Jobs solve problems. Right now the country has lots of problems, so the country needs lots of jobs, which solve problems. And by great coincidence right now the country needs lots of things done. The country needs to repair and modernize its infrastructure. The country needs to update its electrical grid. The country needs to make its buildings and homes more energy efficient. All of these are things that improve the economy in the long run. And the remarkable thing is that all of these are things that will have to get done sooner or later.
So the country could just hire people to do those jobs that need doing — like FDR did. How hard is it to understand that?
1) Hire people to modernize the infrastructure and make buildings and homes energy efficient.
2) All those people are participating in the economy again: paying taxes, buying things, not getting food stamps and unemployment.
3) The economy is much more efficient because of the work that got done on the infrastructure and energy efficiency.
4) The newly efficient economy is more than able to pay off the cost of all the work that was done — that had to be done eventually.
Republicans Obstructing Everything
The current Republican view is that government itself hurts the economy, is “in the way,” and that taxes and government spending “take money out of the economy.” So they continue to block all efforts to revive the economy through jobs programs, investment in infrastructure, even helping the unemployed.
They say that providing unemployment benefits keeps people from being forced to take the lowest-paying, nastiest, most demeaning job that comes along. But progressives believe in democracy and say that’s the point of helping each other — that we are a country where we are in this together to build mutual prosperity — unemployment benefits prevent a death spiral of continually falling demand.
Republicans talk about “pro-growth” policies, always meaning tax cuts for the rich. They say that only rich people “create jobs” so giving more and more money to these “job creators” will eventually trickle down to the rest of us. But all actual evidence shows that this policy does nothing to promote growth, only inequality. In fact the times of highest taxes on the wealthy have been the times of more jobs and more economic growth shared by more of us.
Both Wall Street and Washington have lost sight of the major cause of the deep recession and exceedingly slow economic recovery. To hear all the talk, the major concern is about the impending fiscal cliff and the federal budget deficit. Fix the fiscal cliff and make major reductions in the deficit, they say, and all will be ok. We think they’ve got it wrong.
Anyone who has read The Shock Doctrine understands exactly what this “Fiscal Cliff” scare is.
If you have already read The Shock Doctrine by Naomi Klein you have probably been rolling your eyes at all this “Fiscal Cliff” scare talk. “Here they go again” you’re thinking… If you haven’t read the book, you should. You really, really should.
The Phony “Fiscal Cliff” Scare
At the end of the year the Bush tax cuts expire. When this happens tax rates will rise modestly to where they were when Clinton was President. Also at the end of the year budget “sequestration” occurs. This means that the various cuts Congress approved to end the debt ceiling “crisis” will begin to phase in. (Remember, the debt-ceiling “crisis” was when Republicans refused to allow the country to honor its debts, holding the economy hostage, unless they got deep budget cuts in the things We the People do for each other.)
That’s it. That’s the “crisis.” All of the people who had been hysterical about the budget deficit “crisis” are now hysterical that taxes will go up and spending will go down. Go figure. Maybe — just maybe — I shouldn’t even say it — these “serious people” weren’t … serious … when they said they were worried about the deficit. You see, the hysteria now is because tax rates at the top will go up (cutting the deficit), and because a big part of those budget cuts (cutting the deficit) is military spending. Unfortunately the sequestration also cuts important things that help a lot of people and our economy. But these cuts do not take place all at once (a “cliff”), they will be phased in over time, and the Congress can act at any time to halt any of these cuts. The “Fiscal Cliff” is not a cliff and the language itself is intended to scare people. The name itself is designed to create panic, evoking disaster imagery of people and the economy falling off a cliff. It is the latest manufactured “crisis” and we are all supposed to be terrified and demand immediate and extreme solutions.
Again, the very people screaming loudest about deficits are the people who passed tax cut after tax cut, and military spending increase after military spending increase, and started war after war. Then these same “serious people” terrify the public, telling them that budget deficits will lead to the destruction of the country — and soon. After a decade of screaming “9/11,” “9/11,” noun verb “9/11,” they screamed “deficit, deficit, deficit.” Now they scream, “fiscal cliff, fiscal cliff, fiscal cliff.”
Then after the public is suitably stirred up and terrified they offer “solutions” they say are necessary to cut the scary deficit (that they caused, for this purpose).
And the fixing all has to happen right now, in the “lame duck” Congress, before those new legislators We, the People elected can take office.
The “Grand Bargain”
The “serious people” are pushing for a “grand bargain” that they say will “solve” the “deficit problem” “once and for all.”
Of course, nothing in any “grand bargain” can bind the Congress, and any part of this “grand bargain” can and will be undone by Congress at the earliest opportunity.
The outline of this “bargain” involves “tax reform” and “getting a handle on entitlements.” Tax “reform” does not involve raising tax rates on the wealthy, it “reforms” taxes by getting rid of various deductions and lowering tax rates. “Getting a handle on entitlements” means cutting Social Security, Medicare, Medicaid, Food Stamps and the rest of the things that We, the People do for each other — the things we are entitled to as citizens in a democracy.
(Note — Social Security by law can not and does not contribute to the deficit — they just threw it in because it is “in crisis.” The Social Security “crisis” is that under certain economic projections its funding might run a bit short many years down the road. Compare this possible future shortfall to the huge, vast, bloated, enormous military budget which, unlike Social Security, has no separate funding mechanism and runs 100% short every year. But that is not a “crisis.”)
So a fix for a budget problem caused by cutting taxes, massively increasing military spending and crashing the economy will be “solved” by … not fixing those things. Once again the income and wealth of the country will be shifted away from We, the People and upward to the same 1% who have been benefiting from everything in our economy since the election of Ronald Reagan and the disaster-capitalism formula: cut taxes, raise military spending, then use the resulting deficits to scare people into accepting extreme “solutions.” Rinse and repeat.
The Shock Doctrine
The Shock Doctrine is a book by Naomi Klein that describes a “disaster capitalism” strategy used by wealthy and powerful people to take advantage of crises — even causing crises — to herd people into accepting “solutions” to those crises that really just enrich the 1% at the expense of the rest of us.
In times of crisis (real or perceived) the public is in a state of shock, distracted and ready to grasp at straws to get out of the panic. This is the perfect time for “serious people” to come in and offer pre-planned “solutions.” These solutions usually involve privatizing public institutions and wealth, cutting public services, cutting taxes on the rich, seizing property, lowering wages and pensions … well, just look at Europe’s “austerity” and you get the picture.
This shock-doctrine disaster capitalism model has become standard practice. We see this happening over and over again: crises occur or are manufactured, the media whips people into a panic, and then the “solution” is introduced. The solution involves a “reform” that transfers wealth or institutions into a few private hands.
The Real Problem And Real Solution
We have a jobs problem, not a deficit problem. The best way to deal with the deficit is to put Americans back to work. The real job creators are working people with money in their wallets. We can’t cut our way to growth. These are not just slogans, these are solutions to real problems.
We need to invest in our economy, restoring and modernizing our infrastructure, retrofitting our homes and buildings to be more energy efficient, upgrading our public schools and universities, and fighting to create the manufacturing ecosystems for the new industries of the future,. All of these investments create jobs while they are underway, and pay off by improving our economy for the long term. Inoculate yourself by reading The Shock Doctrine. Inoculate your friends by telling them about the book, and how this game works, over and over again.
“Nothing is more important in the face of a war than cutting taxes.” — Republican Majority Leader Tom Delay, 2003
As the evidence keeps telling us, the basic story is about as simple as it gets. The housing bubbles were driving demand prior to the collapse both directly through building booms and indirectly from the consumption generated by bubble generated housing equity. When the bubbles burst the construction booms went bust. And when the bubble generated housing equity vanished so did the consumption for which it provided a basis.
“The economists are instead steering the world toward more years of stagnation and rising unemployment and poverty.”
The basic economic problem in this context was finding a way to replace the lost demand. The right-wing politicians and their allied economists can repeat all the nonsense the like about promoting business confidence and tax breaks for job creators, but there is no remotely plausible story in which it would be possible to generate enough demand from investment to make up for the demand lost from the collapse of the bubbles.
This means that in the short-term the only way to make up the demand is from the government budget deficits. This is not even economic theory, it is simply accounting.
In Wednesday’s debate Mitt Romney repeated his claim that cutting individual and corporate income taxes creates jobs. But when you look at what actually happened, the periods when we had the highest tax rates were the periods we had the greatest job and economic growth. And the periods with lower taxes had lower job and economic growth. (And we all know what happened in the Bush years…)
Here is Romney at Wednesday’s debate,
“54 percent of America’s workers work in businesses that are taxed not at the corporate tax rate, but at the individual tax rate. And if we lower that rate, they will be able to hire more people. For me, this is about jobs. This is about getting jobs for the American people.”
“The problem with raising taxes is that it slows down the rate of growth. And you could never quite get the job done. I want to lower spending and encourage economic growth at the same time.”
So DO tax cuts for rich people and already-profitable businesses create jobs? DO businesses hire people when they have extra money? When few customers are coming through the door will tax cuts cause businesses to hire people to sit around reading newspapers or checking Twitter?
I think that people with jobs have money to spend and then the businesses that get their business will hire people, and will make money and be happy they have profits to pay taxes on. And I think that the numbers — and charts that help us visualize those numbers — back me up. Here are some of those numbers.
Michael Linden at Center for American Progress took a look at tax rates and job creation, in Rich People’s Taxes Have Little to Do with Job Creation, Conservative Arguments that Higher Income Taxes for the Wealthy Hurt Employment Don’t Hold Up to Scrutiny,
… in years when the top marginal rate was more than 90 percent, the average annual growth in total payroll employment was 2 percent. In years when the top marginal rate was 35 percent or less—which it is now—employment grew by an average of just 0.4 percent.
And there’s no cherry-picking here. Pick any threshold. When the marginal tax rate was 50 percent or above, annual employment growth averaged 2.3 percent, and when the rate was under 50, growth was half that.
In fact, if you ranked each year since 1950 by overall job growth, the top five years would all boast marginal tax rates at 70 percent or higher. The top 10 years would share marginal tax rates at 50 percent or higher. The two worst years, on the other hand, were 2008 and 2009, when the top marginal tax rate was 35 percent. In the 13 years that the top marginal tax rate has been at its current level or lower, only one year even cracks the top 20 in overall job creation.
OK, got that? The periods of highest job growth correspond to the periods of highest tax rates on the wealthy. 70% top tax rates. 90% top tax rates. Maybe this is because that money gets used to build roads and bridges and buildings and ports and dams and the things that make our economy more efficient and competitive. And maybe because the years of low tax rates are the years of government cutbacks because there isn’t enough revenue coming in — infrastructure not maintained, education budgets cut, etc.
What do tax rates do to economic growth? Romney says raising taxes hurts the economy. Is that what happens?
Michael Linden looked at what happens with taxes and GDP growth, in The Myth of the Lower Marginal Tax Rates, Conservatives’ Go-To Growth Solution Doesn’t Hold Up (I’ll spare you the blow-up photo of Speaker Boehner’s face),
The top marginal income tax rate has ranged all the way from 92 percent down to 28 percent over the last 60 years. With such a large range, it should be easy to see the enormous impact of lower rates on overall economic growth, as conservatives routinely claim. Years with lower marginal rates should boast higher growth, right?
That’s definitely not what happened. In fact, growth was actually fastest in years with relatively high top marginal tax rates. Back in the 1950s, when the top marginal tax rate was more than 90 percent, real annual growth averaged more than 4 percent. During the last eight years, when the top marginal rate was just 35 percent, real growth was less than half that.
Altogether, in years when the top marginal rate was lower than 39.6 percent—the top rate during the 1990s—annual real growth averaged 2.1 percent. In years when the rate was 39.6 percent or higher, real growth averaged 3.8 percent. The pattern is the same regardless of threshold. Take 50 percent, for example. Growth in years when the tax rate was less than 50 percent averaged 2.7 percent. In years with tax rates at or more than 50 percent, growth was 3.7 percent.
These numbers do not mean that higher rates necessarily lead to higher growth. But the central tenet of modern conservative economics is that a lower top marginal tax rate will result in more growth, and these numbers do show conclusively that history has not been kind to that theory.
Historically, the United States has actually had some of its strongest periods of economic growth while taxes were high. As this graph from Slate shows, some of our strongest periods of growth in gross domestic product actually occured while taxes were very high:
In the 1950s, which had one of the sharpest periods of economic growth in all of American economic history, the top marginal tax rates for the richest Americans stretched above 90 percent. Likewise, economic growth in the relatively higher-taxed 1990s was much stronger than in the 2000s. This isn’t to say that higher taxes necessarily cause greater economic growth, but it does seem to show that higher taxes do not appear necessarily to be impeding job growth, nor are lower taxes especially helpful.
OK, did you see those charts? Not only do high taxes on the rich not impede growth, but growth looks to be higher when taxes are higher. Maybe this is because higher taxes on the rich means that the government — We, the People — has more to spend on the things that make our economy more efficient and competitive like schools, roads, bridges, transit systems, courthouses, judges, etc…
And, again, the periods of low taxes are the periods of government cutbacks …
David Leonhardt at the NY Times looks at recent numbers, in Do Tax Cuts Lead to Economic Growth?
President George W. Bush and Congress, including Mr. Ryan, passed a large tax cut in 2001, sped up its implementation in 2003 and predicted that prosperity would follow.
The economic growth that actually followed — indeed, the whole history of the last 20 years — offers one of the most serious challenges to modern conservatism. Bill Clinton and the elder George Bush both raised taxes in the early 1990s, and conservatives predicted disaster. Instead, the economy boomed, and incomes grew at their fastest pace since the 1960s. Then came the younger Mr. Bush, the tax cuts, the disappointing expansion and the worst downturn since the Depression.
(Click that graphic for larger)
Whoa, did you see what happened after Bush cut taxes for the rich? Do you remember what happened after Bill Clinton got taxes increased on the rich?
My own 2010 post, Did The Rich Cause The Deficit? included this chart, (The red line is the tax rates, the blue is growth and the red arrow shows the trend.
But, from that post, one thing that cutting taxes on the rich obviously does cause is deficits:
And deficits cause government to cut back, cut infrastructure projects, cut the things government — We, the People – does for We, the People. And the economy slows…
The real job creators are working people with money in their wallets.
Tax the rich, use the money to modernize our infrastructure and help regular working people. Build roads, schools, bridges, ports, airports, dams, courthouses, wind farms, water systems, high-speed rail, municipal transit systems, all the things that make our economy efficient and competitive…
(PS I also came across a chart showing that lowering capital gains rates correlates with lower, not higher, economic growth. But somehow we knew that would be the case…) This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary
Longer term, people will presumably work harder if they keep more of the next dollar they earn.
This is right-wing conventional wisdom. It has been repeated and repeated until people … just repeat it. It is the Ayn Rand argument that people will “go Gault” if that have to pay taxes, and just stop working.
Who don’t people think that people will “work harder” if taxes are raised, because they have to make up what was taxed?
In other words, this kind of argument is just making stuff up because you have to have something to say. Either one works — if you want taxes cut say people will “work harder’ because they earn more.
One more thing: in what kind of world is “making people work harder” a societal good? Maybe in Ayn Rand’s world.
Shouldn’t our economy be about enabling people to have fuller lives, enabling people to have more leisure time, enabling people to spend more time with their kids, or reading and hiking and throwing frisbees with dogs?
You might be hearing about the “Fiscal Cliff.” And you might be hearing about a “Grand Bargain.” You certainly have heard about “Simpson Bowles.” You will be hearing more and more about these strangely-named things because the usual suspects are cranking up the usual propaganda machine again, getting the usual DC elite ready to play out another of the usual take-from-the-people-to-give-to-the-rich games right after the election. This time it’s a push for austerity.
I always start any discussion of deficits and debt by reminding people that the country had a big budget surplus before Bush cut taxes for the rich, and doubled the military budget.
Deficit history: Reagan dramatically cut taxes on the wealthy and corporations. He doubled the military budget. Huge deficit resulted and the country began accumulating massive debt. They called it “strategic deficits,” a plan to “starve the beast” by bankrupting the country and forcing cuts to government, to the things government does for We, the People, and the ways government protects us from exploitation by the wealthy and powerful.
After 12 years of Reaganomics people were fed up, and elected Clinton. Clinton raised taxes on the rich. Those increases combined with the stock market bubble created a surplus and we were paying off the debt, and then something changed. ‘W’ Bush again cut taxes for the wealthy and again doubled the military budget and now the deficits are enormous. So here we are.
But fixing what caused the deficits is not on the table. It never is, because that doesn’t fit the plan.
They say the country faces a “Fiscal Cliff” at the end of the year. After the election the Bush tax cuts for the wealthy expire. And – this is a bit complicated – something called “sequestration” also kicks in. This is a series of budget cuts that happen because of the “debt ceiling” deal, when Republicans held the debt ceiling hostage and threatened to put the country into default, demanding that we immediately take trillions out of the economy. The sequestration deal was a compromise that was intended to force the Congress to agree to a bipartisan solution, which failed.
The sequestration includes military cuts, which our billionaire-backed DC elite believe would ruin the economy when combined with expiration of the Bush tax cuts — because in their minds tax cuts do not cause deficits and unlike other government spending military spending creates jobs. So to avoid the “Fiscal Cliff” after the election Congress is supposed to meet to keep the military budget intact, keep taxes on the rich from rising and cut the things our government does for We, the People.
Why After The Election?
That pesky democracy thing keeps on getting in the way of Wall Street’s plans for our economy. But after the election comes what’s called a “lame duck” session of the Congress. The legislators who have been chosen by the people aren’t in office yet, the ones who have been defeated are still there and the ones who were re-elected know that anything they do will be long forgotten by the next election. Democracy and the will of the people will not be a factor. Every poll says the public wants immediate action on jobs and no cuts in the things government does for We, the People.
If Obama is re-elected the post-election debate will be between the Obama deficit plan, a “Grand Bargain” based on the “Simpson-Bowles” plan vs the Ryan plan — the budget the House Republicans passed that privatizes Medicare and reduces spending on most things government does for our people. If Romney is elected all bets are off.
Simpson-Bowles is a budget plan put together by a Republican Senator and a Director of the Wall Street bank Morgan Stanley. After the President’s National Commission on Fiscal Responsibility and Reform (“Deficit Commission”) failed to make recommendations, the two came up with a plan that cuts Social Security, cuts a number of other things government does for our people, cuts a bit from military and cuts tax rates on the rich and corporations, calling it “reform.” (The plan also eliminates the home mortgage interest deduction, for example.)
Important point: At least Simpson-Bowles is not a “cuts cause growth” plan. It is sold as a deficit plan, even though it cuts taxes at the top and for big corporations. It clearly asks that any cuts not take place until the economy has improved because cuts slow growth.
The “Grand Bargain” is the idea that Democrats and Republicans can reach a compromise involving Republicans “allowing” tax “reform” that eliminates some tax deductions like the home mortgage interest deduction and reducing tax rates on the wealthy and corporations, in “exchange” for cuts in things government does for us, including Medicare, Social Security and Medicaid. (These cuts do not eliminate the need, they just shift the cost away from the government onto the larger economy.) (If this sounds like a “bargain” that entirely benefits the wealthy and large corporations, that’s just how Washington works these days.) (“Reform” always means cutting out things government does for We, the People and reducing taxes on the wealthy.)
Austerity is the word used to describe attempts to lower budget deficits by cutting government spending on the things that government does for its citizens.
The theory is that cutting way back on government will cause the economy to grow because government is “in the way” and helping citizens “takes money out of the economy.” Also, when government provides fewer safety-net services unemployed people are forced to take any work they can get, which drives wages down and increases corporate profits. Government cutbacks also mean they can’t enforce regulations, which unleashes businesses to pollute, commit fraud, cut safety procedures and other things government polices that restrict corporate profits.
But austerity literally “takes money out of the economy.” Public-employee wages and pensions are cut. Government services and safety net programs are cut. Public assets are sold off for immediate cash (reducing the government’s income in later years). So the demand side of the economy is reduced as people are not able to spend.
The Results Of Austerity
In practice the theory that removing government makes the economy grow has not worked out. Several European countries have been severely cutting budgets, and the result has been that the economies in the “austerity” countries have suffered. These economies appear to have fallen into a downward cycle where the “reforms” reduce demand, growth stalls, this reduces tax revenue, which means the deficit-cutting is not effective. (And meanwhile the economies are ruined and people are in misery.)
The austerity cycle happening in Europe works something like this:
Bankers demand “austerity” which drives up unemployment, cuts demand and slows economic growth. The reduction in economic growth causes tax revenue to shrink and increases use of whatever “safety net” programs remain, thereby increasing budget shortfalls.
So bankers demand more “austerity” which drives up unemployment, cuts demand and slows economic growth. The reduction in economic growth causes tax revenue to shrink and increases use of whatever “safety net” programs remain, thereby increasing budget shortfalls. .
So bankers demand more “austerity” which drives up unemployment, cuts demand and slows economic growth. The reduction in economic growth causes tax revenue to shrink and increases use of whatever “safety net” programs remain, thereby increasing budget shortfalls.
So bankers demand more “austerity” … well you might be starting to get the picture.
Recession Resulting From Austerity
These are the GDP growth rates in European “austerity” countries:
Europe is approaching a crisis as the region’s debt crisis and austerity measures increase the rates of depression, suicide and psychological problems – just as governments cut healthcare spending by up to 50 percent, according to campaigners, policy makers and health organizations.
A painful economic recession, rising unemployment and biting austerity measures may have already driven more than 1,000 people in Britain to commit suicide, according to a scientific study published on Wednesday.
Watch the following news reports if you can stomach it:
What You Can Do
So the experiment in austerity that is playing out in Europe is coming to the US after the election – when democracy can’t intervene.
But the way to reduce deficits is to grow the economy. When people have jobs they pay taxes and use fewer social services. Jobs programs that come out of fixing our infrastructure and making us less dependent on oil also make our economy more competitive in the future so they pay for themselves.
Contact your member of Congress and let them know that you do not think this is the time to cut the budget. Let them know that you want to see jobs programs, infrastructure maintenance and improvements, increase the safety net so people are not forced to take any work, cut the age when people can get Medicare and Social Security and increase the benefits so people can retire and open up jobs and renegotiate trade deals that are sucking us dry.
Tell them jobs fix deficits — you want to grow us out of deficits, not pretend that cuts will work. Cuts make deficits worse.
If you have a chance, please book mark this for weekend reading: Prosperity For America, and their Prosperity Economics report.
“Prosperity Economics: Building an Economy for All
Prosperity economics concludes that there is no trade-off between creating a strong, dynamic economy and fostering a society marked by greater health, broader security, increased equality of opportunity, and more broadly distributed growth.”
We, the People are supposed to be in charge. Why would we allow an economic system that don’t serve We, the People? Why allow businesses that don’t pay well, make things that last, provide service and pay back taxes to cover the infrastructure that supports our businesses?
Why would we allow corporations whose only purpose is “to make money for shareholders”? What kind of We, the People system would ever allow that?
Who is our economy for?
Another lackluster jobs report with 80K new jobs and an unchanged 8.2% unemployment, Keep in mind that we lost 815,000 jobs in Bush’s last month, but this still is not good enough. Republicans are intentionally sabotaging job-creation efforts thinking it will help them in the coming election. How do we stop this and get things moving?
In the chart below, the red lines on the left are the Bush years. On the right are the Obama years. Those red lines just keep going down, with a job loss above 800,000 as Obama takes office. Then you see the lines shooting up — the effect of the “stimulus.” The leveling off is the effect of the program’s end — the period of Republican job sabotage.
“I came in and the jobs had been just falling right off a cliff, I came in and they kept falling for 11 months. And if you are going to suggest to me that somehow the day I got elected, somehow jobs should have immediately turned around, well that would be silly. It takes awhile to get things turned around. We were in a recession, we were losing jobs every month.”
Restaurant employment grew at an average rate of 29,000 in the winter months; it has grown by just 13,000 a month over the last four months. Retail employment grew by 22,000 a month in October through January. Since January, employment has fallen by a bit more than 1,000 jobs a month.
Construction employment grew by an average of 48,000 a month from November to February. In the last four months it has fallen at an average rate of 14,000 a month. This drop is difficult to reconcile with Census data that show construction spending up 1.1 percent from February to May.
While the overall picture in the establishment data was weak, there were some positive signs. The local government sector added 4,000 jobs in June indicating that employment may be leveling off. Manufacturing added 11,000 jobs, maintaining its modest rate of growth. The health sector added just 13,000 jobs, about half the normal pace. This is likely an anomaly, but if not, it would imply a slower rate of growth of health costs.
As we’ve repeated time and again, the corruption of the Obama agenda by the corporatists and anti-government ideologues in both political parties began when the 2009 Recovery Act emerged as a $787 billion program, more than half of which was tax cuts, instead of the more than $1 trillion in additional spending that was needed to begin adequately repairing the damage of the 2008 financial crash.
Since then, Republicans have assaulted the economy at every opportunity, forcing an austerity agenda of budget-cutting at the very time that the federal government should have been stepping up its spending in key areas, both to bring our infrastructure up to 21st-century needs and to prevent layoffs of teachers, first responders and other essential public workers by cash-strapped state and local governments. From June 2009 to May 2012, 605,000 state and local public sector jobs were cut. If public sector jobs had instead grown at the same pace as the three previous economic recoveries, there would be an extra 1.2 million jobs, and that level of additional employment would have supported the creation of an additional 500,000 jobs…
When the White House and Democrats in Congress tried several times to pass elements of the American Jobs Act, $450 billion worth of job-creation initiatives, Republicans in the House voted as a solid bloc against the efforts, and Senate Republicans filibustered the legislation. The 2 percentage-point reduction in worker payroll taxes was the only major component that survived. Among the opponents is Romney, who has argued that cutting government spending at all levels is necessary to “help the American people” even though, as Tyson said, the teachers, firemen, and police who are being laid off “are American people who help other American people.”
Late last month, Congress pat itself on the back for passing a two-year surface transportation funding bill that is at best a status-quo stop-gap… The obstacle in the way was once again House Republicans, who refused to support the longer-term funding commitment needed by state and local transportation planners without numerous “poison pills,” including provisions that would have authorized construction of the Keystone XL pipeline without robust environmental review and would have ended federal regulation of hazardous coal waste disposal from power plants. If it were not for congressional Republicans’ repeated obstruction or dilution of virtually every significant job-creation proposal sent to Congress since 2009, unemployment today would likely be under 7 percent instead of stubbornly persisting at around 8 percent. [emphasis added]
The Scariest Chart
Here is the chart of jobs doring this recession compared to previous recessions:
The problem, in a nutshell, is this: The old economic model has utterly failed us. It has destroyed our communities, our democracy, our economic security, and the planet we live on. The old industrial-age systems — state communism, fascism, free-market capitalism — have all let us down hard, and growing numbers of us understand that going back there isn’t an option.