Barely past the January 1st congressional vote to raise taxes for the first time in decades, economists are informing us of the stakes that will be at issue soon for our economy in what is called the fiscal cliff. From Robert Reich, we are told deficit reduction is the wrong direction to go.
Instead our actions and congress’ task is to have jobs be the ultimate source of direction. The job market is treading water with unemployment at 7.8 and 12.2 million looking for work. The economy is responsive to jobs and that is a constant pointed out by Reich. .http://www.huffingtonpost.com/robert-reich/december-jobs-numbers_b_2409427.html
The new congress will have significant challenge and ultimate responsibility for the direction we take, but as Nate Silver comments, liberals and conservatives seem less than clear about what has already happened with the first tax increase in decades.http://fivethirtyeight.blogs.nytimes.com/2013/01/02/why-its-hard-to-score-the-fiscal-deal/ Both sides of the house are not that certain about who won and what they won as they prepare to gather again. Silver suggests that they might do well to consider what their objectives are, rather than focusing on latest developments with the media driving the show, pushing the rhetoric and pointing to extremes.
As Silver sees it, the outcome of January 1st was significantly positive for Democrats, for instance in having the payroll tax extended. He comments that though it will be the poor and middle class who feel the weight of this extension, it is consistent and does contribute to the “expansionary policy and redistribution” that is a significant goal of the Democrats. The extension of unemployment benefits serves that purpose as well with the increase oƒ income and spending by the unemployed resulting. The “hard to score the fiscal deal” as a win or potential loss in moving forward described by Silver makes sense.
Paul Krugman takes the discussion of what happened January 1st to what we have at stake is “class warfare.” http://www.mercurynews.com/opinion/ci_22326009/paul-krugman-big-fail He states that to make sense of what has happened in congress, and where we go from here, clarity about the direction and outcome is needed. As he describes it, the progressives want to maintain achievements of the new deal and the Great Society. They want to implement and improve Obamacare so we become “a normal advanced country that guarantees healthcare to all of is citizens.”
On the other hand, the conservatives want to “roll back the clock to the 30’s” in their positions and policies. “The Big Fail” he states, is the misunderstandings around taxes and spending.
Krugman points out that the economy is not like a household income. He illustrates that difference in as much as consumers in response to the bubble bursting on the housing market, saved more, spent less and the failure of the economy came from “private spending reduction leading to a global recession.” He points out that the motive for a household income to spend less and earn more does not apply to an economy. “In an economy, spending and earning go together,” Krugman states.
That is why the austerity programs that came up in response to the Greek economic failure have not worked, he claims. Yet, the IMF and the British government continue down the road of austerity. And this is the goal of the Republicans, Krugman points out. In demanding deficit reduction, cutting spending is a move toward austerity in his view. “That confrontation over the debt ceiling in demanding spending cuts will only drive us further down and into a full scale depression,”he states.
Krugman describes the failure of our economic policy in recent years as having been directed by those who have “been responsible for the failure, and yet they both retain power and refuse to learn from experience.”
So for the economists, for the private citizen, democracy will be at work in this new congress and the policies that follow will effect one and all. Our engagement is critical.