Either by design or ineptitude, our leaders have gotten us into a terrible situation that is likely to play out immediately after the election no matter who wins.
The CBO reported
this week that the "fiscal cliff," which is commonly defined as the expiration of the Bush tax cuts and the effects of the sequester will result in a return to recession. Greg Ip of The Economist pointed out yesterday that the fiscal "cliflett" --- the expiration of the payroll tax cut, unemployment insurance , new medicare taxes on the wealthy and prior scheduled cuts is almost as bad. The IMF projects that fiscal policy will tighten more in America next year than in Spain, Italy or Portugal.
Obviously, if Romney/Ryan wins the election we have no reason to believe the Republicans will not fulfill their campaign promise to enact unprecedented spending cuts and tax cuts. But even if the president wins another term and the Democrats hang on to at least one House, we have had the Pete Peterson deficit hawks circling behind the scenes all this summer to get a consensus for a Simpson Bowles style plan to cut the safety net programs in exchange for a vague agreement to raise some sort of "revenue". Sadly, this basically reflects the president's "balanced approach" as well, which he characterizes in campaign ads, as being 3 trillion dollars in spending cuts while "asking the wealthy to pay a little bit more." Two days ago he told the White House press corps that the Grand Bargain he envisioned with John Boehner remains his preferred approach:
[T]he biggest thing that Congress could do for the economy would be to come up with a sensible approach to reducing our deficit in ways that we had agreed to and talked about last year.Last week he lamented to the New York Times
that the Democrats don't get enough credit for being willing to cut social security and medicare.
The progressive House democrats have offered a best deficit reduction plan which takes the biggest bite out of defense and raises taxes substantially on the wealthy. The administration is not interested in this approach. Needless to say, neither are the Republicans.
So, we are about to enter an economic maelstrom immediately after the election in which the choices on offer wil be between going over the fiscal cliff, a harsh austerity program from the Republicans and a "balanced approach" from the Democrats which includes unacceptable cuts to social security and health care programs along with massive cuts to government. All of these choices will lead to more sluggishness and a likely return to recession.
Up until now there has not been a coherent, progressive growth agenda on the table, which means that the likely compromise would be between the president's mixture of cuts and "asking the wealthy to pay a little bit more" and the harsh austerity demanded by the Tea party. That is an unacceptable compromise. And it will make things worse. If Europe has shown us anything it's that the idea of the "confidence fairies" coming to the rescue once the government enacts an austerity agenda is a fantasy.
That agenda is now in play. A new report written by Yale professor Jacob Hacker, author of the influential books ,
and Off Center
and Nathaniel Lowenthiel and it's called Prosperity Economics: Building an Economy for All:
This report lays out an alternative to austerity economics, one based on our history, the successful experiences of other nations, and recent currents of research and theory in economics and allied fields. We call this model “prosperity economics.” Its central conclusion is that there is no inevitable 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.
To the contrary, societies that cultivate a wider distribution of the returns from increasing social wealth are the ones that flourish economically. When all members of a society share in the rewards of advancement—from better health to greater political freedom, from basic economic security to greater upward mobility—society is more likely to prosper in a sustained way. And when the government plays an active role in the economy through investments in education and scientific research, economies are more dynamic and innovative.
With all the propaganda coming from all sides, I know it's hard to believe that progressive economics are for real, but the facts are the facts.
Considering the stakes that I laid out above, I think it's incumbent for progressives to make this case for prosperity economics as loudly as we can and show that there is an alternative to the deficit mania that's taken hold of everyone in Washington. If nobody ever makes the case for growth and prosperity as the alternative to austerity, the people can be forgiven for not knowing about it and the political establishment will logically see any election outcome as a mandate for more austerity, since some version of it is all that's on the table.
But if enough people speak up for the prosperity agenda they will have to be taken into consideration. And that alone will move the dialog away from the cliffs, clifflets and disasters that are awaiting us and set us on a more sane economic path.I urge you to read the full report.
It's written by smart people who know how to write clearly and unlike Paul Ryan's various Very Serious plans, it actually adds up. If progressives can get this into the mix we might have a chance to stave off this Pete Peterson trainwreck that's been hurtling out of control.