By Robert Borosage, cross-posted from Campaign for America's Future
Take a good look at Europe - bloody riots in Athens and Madrid, rising unemployment, spreading poverty and suicide, and a deepening recession - because the current American elite consensus bizarrely wants to drive America down that same path.
Europe's miseries come from imposing austerity before recovering from
the recession caused by the financial collapse. Conservatives in
Germany and England inflicted harsh measures to enforce budget
discipline - hiking taxes, cutting spending.
In the US, the Obama recovery plan and the deal with Republicans over
extending the Bush tax cuts combined to limit and slow the imposition
of austerity. The result: Europe is sinking, while the US economy
retains slow, but halting growth.
But now the deficit hawks are gearing up for another run at driving the US back into economic recession.
At the end of the year, we face a train wreck. After the November
election, the Bush tax cuts, the payroll tax cut and extended
unemployment benefits expire. The automatic cut - "sequester" in budget
speak - of nearly 10% of military and domestic discretionary spending
(everything except guaranteed programs like Medicare and Social Security
and interest on the national debt) kicks in. We even hit the debt
limit to add to the high stakes.
If all this is allowed to occur, it will subtract
over 3% of GDP from an economy growing at 2.5% or less. A drop back
into recession would be almost inevitable. So a deal is needed.
But the deal in everyone's head is some kind of "grand bargain," like
that almost cut by House Speaker John Boehner and President Obama last
year, or like that outlined by the co-chairs of the President's deficit
commission, Erskine Bowles and Alan Simpson (which failed to gain the
needed votes to pass the commission).
Centrist Democrat Kent Conrad, chair of the Senate Budget Committee,
has announced that he will use the Simpson Bowles recommendations as a
guideline for budget negotiations that he assumes will take place in the
lame duck Congress have the election.
There's lots not to like in Simpson-Bowles which marches under the
banner of "shared sacrifice" at a time when 1% of the population is
capturing 93% of the rewards of growth, while paying the lowest tax
rates in living memory.
But the horror is less the bad terms of the supposed bargain, than
its zombie like infliction of austerity on an economy barely out of the
We've still got some 23 million people in need of full time work. We
haven't recovered the jobs that were lost in the collapse, much less
the jobs needed for young people coming into the economy. Wages are
still failing to keep pace. Nearly one in four mortgages are under water; foreclosures are rising.
Yes, we have trillion dollar deficits. But austerity - some deal
that raises taxes and cuts spending now - will put more people out of
work and make reducing deficits even harder.
After experiencing the horrors of this misguided policy, European
leaders will eventually turn back to trying to get their economies
moving again. What we need this fall is a different grand bargain - a
global agreement, like that that was forged in early 2009, for
coordinated action by governments to reflate the economy - to borrow and
spend to put people back to work.
For this to occur, the bipartisan elite fixation about inflicting
austerity now must be challenged. If we are to avoid a lost decade or
worse, we need action to support still weak and staggering economies.
Global coordination would be the best way to achieve that. That
requires putting a stake in Simpson Bowles, the Boehner-Obama grand
bargain and other zombies.
In this country, the necessary remedies are clear. With interest
rates near zero, a decrepit infrastructure that must be rebuilt, a
construction industry flat on its back, anyone with a whit of business
sense would finance a massive Rebuild America program over the next few
years, put people back to work, and build the sinews vital for a more
competitive economy. We will never have a better opportunity to make
the investments that we will have to make anyway.
We should send money to states to rehire teachers, make universities
affordable, and strengthen not weaken our public schools. It's simply
nuts to make kids pay the price of Wall Street's follies.
And if we could get beyond ideological perversities, we'd set up a
green corps, an urban corps, and a jobs corps to guarantee a job for
every veteran and young person under 25. No one should risk their life
for the country and return to an economy with no place for them. Young
people are coming out of school into the worst economy since the Great
Depression. Condemning them to idleness is a recipe for depression,
drugs, crime, and misery. And we will all pay dearly for a lost
Certainly, we have to be serious about getting our books in order.
The wealthy and the corporations should pay more so we can afford the
investments we need. But the overwhelming source of our long-term
budget woes comes from projections of soaring health care costs. If we
paid for health care at the rate other industrial countries do (with
better results), we would be projecting surpluses, not deficits.
But right now, the focus should be on putting people back to work and
getting the economy moving. Until that happens, austerity - as Europe
is now experiencing - is a contagion, not a cure.