Wednesday, August 3, 2011

Last Thoughts on the Negotiated Debt Ceiling

With the grotesque business of the debt ceiling negotiations finally apparently concluded, and the far right largely triumphant - pushing nearly $3 trillion in austerity measures with no tax-increases - despite the foolishness implicit in trying to balance a budget during a recession - we should now, as Dean Baker argues here, turn our attention to what the economy is actually doing. Growth has all but stopped and unemployment has exploded. Baker notes:
On Friday, the commerce department released data showing the economy grew just 1.3% in the second quarter. Even worse, it revised down the first quarter growth number from 1.9% to just 0.3%. This means that the economy was growing at just a 0.8% annual rate over the first half of 2011. This is well below the 2.5% pace that is necessary just to keep unemployment from rising.
Of course, unemployment has been rising, with the June figure hitting 9.2%. That is up from a post-recession low of 8.8% in March. The unemployment rate does not give the whole story, since many of people have lost hope of finding a job and given up looking for work altogether. The employment to population ratio (EPOP) – the percentage of the population with jobs – has fallen back almost to its low point for the downturn. The EPOP for African Americans has hit new lows in each of the last three months.
Instead of worrying about US debt being downgraded on the Standard and Poor (S&P) index, perhaps politicians should be worrying about how to actually create jobs - most commonly done by governments through vigorous spending on social programs, infrastructure improvement or replacement projects and other stimulus programs rather than worrying about debt. The whole idea that there is some inherent benefit to a government always operating a balanced budget is non-nonsensical anyways, and current measures seem to be benefiting exclusively corporations who are (a) loathe to pay their taxes, and (b) cutting jobs anyways.

I'm getting tired of carping on about the economy on this blog. Everyone is tired of hearing me carp on about the economy. That said, the same economic problems will persist until we hold elected officials responsible and require them to push a sensible program that would create jobs, require meaningful financial reform, and require corporations and the very rich to pay their fair share of the tax obligation.  This must be done rather than continuing to play these increasingly dangerous ideological games that have no relation to how much of the population actually lives or how economies work.

The humanity has been ripped from people. It's time to adjust policies such that humanity is brought back into discussions about the economy, fiscal policy, taxation and programs expenditure. As the late Joe Strummer once wisely said: "Without people, you're nothing."

1 comment:

Arkan said...

Great piece Alex.

Cass Sunstein has argued that certain ideas have a "rhetorical advantage" in that, despite any evidence to the contrary, they just sound/feel right. I think much of the political discussion over our national debt is structured in such a way that the rhetorical advantage is overwhelmingly in favor of cuts.

It's hard for average people to grapple with the concepts and numbers involved in the debt deal. For example: people hear that the debt has increased by an unfathomable magnitude since 1945, but have trouble pairing that with the fact that the economy is vastly bigger as well. I think the Republicans comparison of the government's budget to that of a family's, while fallacious, was appealing, even enlightening, in the way that only overly simplistic analogies can be. It gave people something to hold on to, and scared the shit out of them at the same time. More generally, the near constant reporting of government waste, irresponsibility, corruption, , etc. leads people to be always cynical of EVERYTHING the government does.

When this confusion is combined with a bit of fear mongering, it makes for a heady political brew that leads otherwise reasonable people to accept nonsense. Given that Obama isn't putting up much of a fight against this, I think most people will go along with it all to willingly.