The Contest Over Defining Our Biggest Economic Problem
Robert B. Reich
"Our biggest problems over the next 10 years are not deficits," President Obama told House Republicans, according to those who attended the meeting.
The president needs to deliver the same message to the public, loudly and clearly. The biggest problems we face are unemployment, stagnant wages, slow growth and widening inequality -- not deficits. The major goal must be to get jobs and wages back, not balance the budget.
"This is an invitation," Ryan explained when he unveiled the plan last week. "Show us how to balance the budget. If you don't like the way we're proposing to balance our budget, how do you propose to balance the budget?"
Until now, the president has seemed all too willing to engage in that debate. His ongoing talk of a "grand bargain" to reduce the budget deficit has played directly into Republican hands. As has his repeated use of the Republican analogy comparing the government's finances to a household's. "Just as families and businesses must tighten their belts to live within their means," he said of his 2013 budget, "so must the federal government."
Hopefully, he's now shifting the debate.
The government's finances are not at all like a household's. In fact, it's when American families can't spend enough to keep the economy going, because too many of them are unemployed or underemployed and have run out of money, that government has to step in as spender of last resort -- even if that means taking on more debt.
If government doesn't fill the spending gap, an economy can collapse into deeper recession or depression, pushing unemployment far higher. Look at what austerity economics has done to
In addition, it's perfectly fine for government to borrow and continue to borrow in order to invest in new roads or other infrastructure, or education, or basic research -- when those investments pay off in higher rates of economic growth.
The notion that government spending "crowds out" private investment, keeping interest rates higher than otherwise, is obsolete in a global economy where capital sloshes across national borders, seeking the highest returns from anywhere.
Societies that invest in the productivity of their people attract global capital and create high-paying jobs. And since most big corporations are no longer dependent on the productivity of any one nation, the responsibility for making such investments increasingly falls to government.
Not that we should disregard the debt altogether, but the best way to deal with it is to do so gradually, through economic growth. That's how we reduced the giant debt
Republicans want Americans to believe government budgets are like family budgets that must be balanced, because the analogy helps their ideological aim to "drown (the government) in the bathtub," in the memorable words of their guru,
As long as there's a debt and balance is the goal, shrinkage is the only option -- if tax increases are ruled out.
At last the president wants to change the debate and focus on the real economic problem. In an interview last week with
Let the real contest begin.
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The Contest Over Defining Our Biggest Economic Problem | Economy
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