Professor Bill Black (author of The Best Way to Rob a Bank is to Own One) is outraged over the phony “fiscal cliff,” because there seems to be a bipartisan consensus (including President Obama) that the solution to that “crisis” is to engage in austerity measures, to cut government spending by various means, including the shredding of the safety net (Social Security, Medicare).
Keynes has again proven correct. Europe adopted austerity and needlessly and destructively hurled the Eurozone back into recession. We would have to be insane to engage in such financial suicide.
The federal budget deficit is too small. You did not misread that sentence. It is a logical consequence of the CBO’s reasoning in warning in its November 2012 report against the austerity of the “fiscal cliff.” We would have recovered more quickly from the recession if we had increased more substantially our governmental spending and reduced (net) taxes. Both parties’ leaders purport to understand (hence their embrace of the CBO report) the suicidal nature of austerity, but both pander to the electorate by railing at the deficit. It is as dishonest as it is economically illiterate and it has created a massive barrier to getting the public to back rational policies. The U.S. has had much larger deficits (relative to our GDP) during and after World War II. Those deficits allowed us to defeat the Axis powers, recover from the Great Depression, attain full employment, extend the safety net, and achieve robust economic growth without destructive inflation.
Obama needs a real jobs guarantee program for every American able and willing to work. There is no greater waste than leaving over 20 million Americans underemployed, and Republicans’ ideological fantasies about the unemployed cannot survive a jobs guarantee program. The administration should also fund revenue sharing. The original stimulus plan had a major revenue sharing component, but a coalition of conservative (“blue dog”) Democrats and Republicans killed it. This was a travesty. A national government with a sovereign currency is not like a state or local government [or like an individual household either – ed]. It can and should run a deficit in response to a recession. A state or local government cannot do so. It was certain that state and local governments would suffer severe drops in revenues at the same time that the need for increased state spending to help the unemployed. The inevitable result was that state and local governments would have to fire over one hundred thousand workers and add to unemployment during the Great Recession. The win-win is revenue sharing – a Republican policy initiative. The federal government transfers hundreds of billions of dollars to the state and local governments, which allows them to avoid firing the workers and cutting social services when they are most needed. All of this allows the economy to recover more quickly and eventually reduces the deficit. It also makes America vastly more humane.
Read the full article here: “Why Jobs Should be Obama’s Top Priority — Not Suicidal Austerity“