Beating Pens Into Plowshares
By Wes Rackley
The Left and the Right have traded in their partisan pens for consensus in overcoming the GOP leaderships “big government” meme.
The biggest problem confronting a timely exit from this recession is the GOP exploiting easy political targets. Instigating a populist revolt against deficit spending when they should be working to fix the mess that they made.
This poor sportsmanship is beyond the pale even for politics. Disgraceful, dangerous politicization of an ongoing economic crisis that we should all be facing together.
Lawrence Mishel & David M. Walker in an rare bipartisan effort last week combining forces, crossing party lines to emphasize that some issues were simply to important to America’s fiscal survival to be used as a political football.
“The fact that the two of us, who have philosophical differences on the proper role of government, find much to agree on about deficits is a testament to the importance of dropping this useless dichotomy and finally talking about deficits in a reasonable way.”
Nobody disputes the need for deficit spending to replace lost liquidity until we’re back on our feet. Structural deficit problems like the rising health care cost described by Warren Buffet yesterday afternoon, and corporate welfare have to be addressed in any earnest attempt to control spending. But the structural deficit is a separate issue from deficit spending for creating and saving jobs and in maintaining a persistent recovery.
Last Friday The Center on Budget and Policy Priorities released a report detailing the need to increase government spending to effectively meet the challenge of sustaining the recovery:
“The Senate should include President Obama’s proposal to extend for one year and modestly expand the TANF Emergency Fund in the bill it is crafting to respond to historically high unemployment and weak consumer demand. The Fund allows states to provide many unemployed, low-income parents with subsidized private-sector jobs at a very economical cost per job.”
“The Fund is set to expire on September 30, 2010, at a time when unemployment is expected still to be at or near double-digit levels and growing numbers of people will have exhausted their unemployment benefits. Unless Congress extends the Fund soon, few states will continue their subsidized employment programs beyond September 30, and many of the 100,000 jobs created will be lost.”
Baseline Scenario sounded a dire warning that should send chills up and down your spine regardless of you party affiliation:
“The boom will be pleasant while it lasts. It might go on for a number of years, in much the same way many people enjoyed the 1920s. But we have failed to heed the warnings made plain by the successive crises of the past 30 years and this failure was made clear during 2008-09.”
“The most worrisome part is that we are nearing the end of our fiscal and monetary ability to bail out the system. In 2008-09 we were lucky that major countries had the fiscal space available to engage in stimulus and that monetary policy could use quantitative easing effectively. In the future, there are no guarantees that the size of the available policy response will match the magnitude of the shock to the credit system.”
“Much discussion of the Great Depression focuses on the fact that the policy response was not sufficiently expansionary. This is true, but even if governments had wanted to do more, it is far from clear that they had the tools at their disposal – in particular, the size of government relative to GDP is limited, while the scale of financial sector disruption can become much larger.”
“We are steadily becoming more vulnerable to economic disaster on an epic scale.”
By Peter Boone, Simon Johnson, and James Kwak
And the OECD Comments:
“The report says the recovery is tepid because economic activity is being held back by households and businesses repairing their finances and reducing their debts. With a subdued recovery and substantial spare capacity, inflation is projected to continue to fall well into 2010.”
“China is leading the global recovery, helped by its limited direct exposure to the financial crisis and by a massive stimulus package.”
Mr Elmeskov said “government budgets had suffered badly from the crisis. The gross debt of most OECD countries could be larger than their GDP by 2011. Action to bring public finances under control will need to be substantial in most countries and drastic in some.” But he added “spending cuts or tax increases should not be carried out at a pace or in areas that would weaken the recovery.”
“Radical policy action will be required in the years to come to restore sound macroeconomic balance, healthy growth and low unemployment, “said Mr Elmeskov. “Only when that has happened will the crisis have been fully overcome.”
So what is the GOP leaderships response to this unanimously stated economic threat of a weak stimulus response? Again they drag out the tired meme “government is the problem not the solution.” The only way this strategy can work for them is if they somehow keep everyone from actually thinking about it.
The most threatening issue right now for us is a political one. It’s an rogue party that has devolved into policy debate the intellectual equivalent of a knee to the groin.
The GOP leadership has sunk far below the threshold of viability. Their strategy of deadlocking Washington is a direct threat to our ability to respond to a crisis.
The problem even inspired the administration to try and get around the populist road blocks the right has created for themselves, by suggesting bipartisan commissions outside the political sphere to help. But the GOP rejects that outright while accusing them of trying sneak European style Socialism in to the system.