August 10, 2011

First put out the fire (and save lives)

The theme here lately is the current economic and political mess the US finds itself in and how we got there.

Installment one is here. Short version: 30 years of bad policy and bad (supply side) economics set up the Great Recession.

Installment two is here. Short version: the policy response to the Great Recession, TARP and the Recovery Act, might have been enough to restore very modest economic growth but weren't enough to end the jobs crisis. They were thus vulnerable to political attack.

Here's installment three. The shortcomings of the Recovery Act, especially continuing anger over high unemployment, helped fuel Republican victories in the 2010 midterm elections, shifting control of the House and weakening the Democratic majority in the Senate. But as soon as the dust of the election had settled, all that supposed concern about jobs disappeared and dealing with debt and deficits became the order of the day.

As someone said, elections matter.

While deficits and debt are important matters, there are several flaws with the right wing take on the issue. One will suffice for today: cutting government spending in the midst of a recession or very weak recovery is likely to make the recession and its related problems--like high unemployment and weak demand--get even worse, which could also make the long term debt problem worse.

After all, fewer people working and more people with reduced incomes means fewer people paying taxes and more people paying less in taxes. And cuts in public spending mean cuts in public sector jobs as well as private sector spin offs at a time when private sector job growth is very weak.

It's a bit like worrying about a new roof on the house when a fire has started in the kitchen. Fixing the roof is fine, but save lives and put out the fire first.



WANT TO CUT DEBT? Raise revenues.



Hollowdweller said...

When a leech or tick gets on something eventually they fill with blood and fall off.

Preserving the life of the parasite and the host.

However the banks and business community who suck the blood of the working class for their living have forgotten this important fact from nature.

El Cabrero said...

That's a great analogy!