The sequester looms. Republicans in Congress are insisting on large cuts in federal government spending – except to defense – along with more tax cuts on top of all those that have already been passed. Rather than compromise on their severe demands, they’re blocking any agreement. Barring an agreement by Friday, broad, arbitrary cuts to most government programs will automatically take hold.
Never mind that economists believe that sharply cutting the deficit now, with the economic recovery still fragile, could throw the economy into another recession. If you don’t believe that, take a look at Europe. Yes, they’ve had other problems. But Europe’s insistence on “austerity” – harsh spending cuts – with economies already weak have sent that continent into its second recession in five years. And Republicans want to do the same thing to the U.S. economy.
Abruptly cutting the deficit now isn’t just unnecessary – it’s senseless and destructive. State and local government spending as a percentage of GDP is still well below its levels in 2008 and 2009, the result of lower tax receipts and mandatory spending cuts on those levels. Businesses remain wary of expanding, with the recovery weak and Congress seeming intent on sabotaging it. Consumers are starting to show a little confidence, but high unemployment rates and lingering consumer debt still cast a shadow across them.
Standard macroeconomics says that federal government deficit spending when the economy is below its potential isn’t just okay – it’s necessary. Someone has to fill in for the lower spending of state and local governments, business, and cautious consumers. If not, the economy could take years to dig its way out of the huge hole it fell into in 2008 and 2009. And the federal government’s the only one out there big enough to do it.
It’s not that the deficit doesn’t need to be reduced. It does. But it’s already been declining on its own, as the economy has started growing again. The federal budget deficit for the 12 months ending February 2010 was nearly $1.5 trillion. The deficit for the 12 months ending January 2013 was just over $1 trillion – a decline of 43 percent. And it will continue to decrease, so long as the economy continues to recover.
The right time to decrease the deficit a lot is when the economy is expanding solidly. As it was when President George W. Bush took office in 2001. We actually had a federal budget surplus then. We were starting to pay down our public debt, the way we should when the economy is growing. But instead of letting that continue – paying off some of our debt when we could so we’d have a cushion when we needed it, Bush slashed taxes, particularly for his rich cronies. That surplus turned into a deficit within months.
We do need to make longer-term plans for decreasing the deficits, but that needs to be done with a combination of gradual spending cuts and tax increases, mostly for the rich and super-rich. Income inequality has been increasing enormously in the U.S. for decades, and a lot of that is the result of less progressive taxes. That needs to be reversed. Instead of withdrawing financial support for those most in need, we need to be investing, in better education and training, in improved infrastructure, and expanded health care for Americans.
That needs to be done with a spirit of compromise and give-and-take. Not the “take-your-ball-and-go-home”, “my-way-or-the-highway” attitude of Republicans. They’re willing to sacrifice the entire economy, risking hundreds of thousands of lost jobs, if they don’t get everything they want. Holding the entire country hostage in order to reward their rich donors with even more tax cuts.
We shouldn’t reward that kind of political brinkmanship. Hell – we shouldn’t even tolerate it.
It’s time to stand up to the Republican extremists and tell them we’ve had enough of their bullying and strong-arm tactics. We want progress on the federal budget, and we want it now.
This country deserves better than what the Republicans are giving it.