Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
February 25, 2013 at 10:36 AM
Making peace with the sequester
It looks as if the sequester will happen. The public doesn’t actually want to cut any government programs. There’s no economic reason to do so: Borrowing costs remain at historic lows, we borrow in our own currency, and cutting government spending in the midst of a slow recovery marked by continued high joblessness will only make things worse. The deficit is almost entirely a product of the collapsed economy, along with the Bush tax cuts and two long wars; it’s coming down. Nevertheless, the D.C. elites, from President Obama to Republicans controlling the House have bought into the idea that the deficit is our most pressing challenge.
So we’re going to embark on an experiment not seen in this country since 1937, when FDR throttled back spending on the New Deal and promptly sent the economy, which had been recovering smartly, into a new recession. Austerity in Europe has proven to be a disaster, too. Still, some good might emerge. Ever since Ronald Reagan, politicians have gotten ahead by claiming that “government is the problem.” Nevermind that the federal government grew under every president, including Reagan, who also added government jobs to help come out of the 1981-82 recession (unlike Obama, who has been cutting jobs).
The initial American austerity is relatively small, amounting to about 2 percent of the federal budget. That’s just for starters. So let’s find out if we really need the federal government.
For Republicans, the idee fixe is to preserve low taxes for the richest and corporations at all costs, while beginning to cut “entitlements.” The latter would be Social Security and Medicare, which my cohort has dutifully paid into to fund a dignified retirement for “the Greatest Generation.” Most Democrats are open to the idea, too, especially the president, who only wants the GOP to give a little on taxes.
This is a terrible idea during a time of widening income inequality. But the elites pushing it live far from average Americans. And one key question remains: If boomers are expected to work until we’re 67 or 70 or forever, where are the jobs? Unemployment remains severe. Most jobs created pay poorly and offer few benefits. And age discrimination is one of the most pervasive Things We Don’t Discuss in this society.
So make sure your seat belts are fastened, your tray tables are stowed and your seat backs are in their full, upright and locked position. The reality is that the federal budget is an integral part of the American economy. We need to spend more on making America competitive and creating the growth that will narrow inequality and return the opportunity of the past. We need to spend less on the military and corporate welfare, but make this transition in an orderly way so as not to shock the economy.
But we’re not going to do that. We’re off into an Ayn Rand fantasy trip. If a few hundred thousand poor people get hurt, those are the breaks, right? American exceptionalism.
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Today’s Econ Haiku:
The power of yes