Congress Must Strengthen, not Weaken, the Economy: Avoid the Fiscal Cliff
by Edith Rasell, Minister for Economic Justice
The United States is at a critical turning point. Can we create an economic system that benefits all of us, or will we continue toward economic stagnation with huge wealth for the few and misery for the many? Decisions that Congress will soon make about the federal budget and the so-called fiscal cliff will take us further down one of these paths. It doesn’t look good.
Building an economic system that benefits all of us requires two key strategies: creating jobs to strengthen the economy, and leveling the playing field so everyone benefits from our nation’s growth.
Consider the first strategy, creating jobs. Unemployment is our nation’s primary problem, a catastrophe affecting millions of households. Unemployment and the weak economy plus recovery efforts are responsible for nearly two-thirds of the federal government deficit. (One-third is due to the Bush tax cuts that primarily benefited the wealthy and the wars in Afghanistan and Iraq. Without these factors the deficit would shrink by a whopping 98%.) Creating jobs to strengthen the economy is the best way not only to build a fairer economy but also to reduce the deficit. Businesses are not hiring and will not so long as the economy is weak and the economic future uncertain. After government spending puts people back to work, back to paying taxes, and back to buying, then companies will want to produce more and need to hire more workers. At that time, the government can cut back its spending. Now, government spending for job creation is sorely needed. This means that, for the next year or two, the country needs a large deficit to strengthen the economy.
But Congress is not planning to create jobs. In fact, the nonpartisan Congressional Budget Office predicts that if Congress goes forward with plans to cut the deficit by over $500 billion, as currently planned, the result will be massive job loss and another recession. This is the so-called “fiscal cliff.”
According to the CBO, to avoid a recession Congress must scale back some spending cuts and continue some tax breaks that are currently scheduled to end in December, 2012. In other words, we need to shrink the deficit by much less than planned. So we should not raise everyone’s taxes in January; some tax breaks can continue. Whose? We also should not cut spending as much as planned; some spending should continue. On what?
But while it is good news that Congress is thinking about changing the budget and prevent a recession, the details are all bad news. Many policymakers want to continue tax cuts for everyone, including the wealthy and also protect military spending while slashing social programs and core government functions like education, environmental protection, research, and health care.
This brings us to our second key strategy: the need to level the economic playing field. The proposed changes to the 2013 budget would do just the opposite. They would continue the skewed practices of the past that favored the wealthy and would widen the gap between the very rich and everyone else.
Instead, Congress must preserve tax cuts that help lower- and middle-income households, not wealthy ones. Spending cuts should target the military whose funding rose by nearly 50% over the past decade, not counting the billions in supplemental funds for wars in the Middle East. Current plans cut military spending to 2007 levels; these plans should not change. But cuts to social programs and core government functions, areas that have already been repeatedly reduced, should be halted.
We can have an economy that works for all of us if Congress seeks to make it so.