Sunday, July 31, 2011

Raise the Debt Ceiling Without an Economy-Destroying Austerity Package

Every American has four federal representatives that they should contact about the debt ceiling debate: the President, their two Senators, and their Representative.

In case you haven't heard, the Congress has passed a law setting up a debt ceiling, and once our national debt gets up to the ceiling the Federal Government basically has to stop spending money. So the feds are negotiating about how much to raise it by, if at all, and how much of a package of spending cuts and/or tax increases to do to start balancing the budget now. The accounting gimmicks that the feds have been using to keep the government going until now will start to break down in two days: Tuesday August 2nd.

This debate is fundamentally flawed because it assumes that we should be trying to balance the budget now, at a time when the national unemployment rate is 9.2%. That figure means that the number of unemployed in America, currently 14.1 million people, is about twice as high as it would be during a healthy economy. In other words, there are about 7 million Americans who would normally be employed, who are currently out of work.

I've taken a few economics courses in my time. This is what I learned about fiscal policy in them: The things you have to do to balance the federal budget are raise taxes and/or cut government spending. Both of these things will hurt an economy and drive up unemployment during a recession or other similar periods of economic weakness, like the situation we're in now. It makes intuitive sense. Less government spending means things like fewer government contracts, say for infrastructure projects, which means fewer workers are needed to build things. It could also mean things like lower payments to Social Security recipients, meaning seniors have less money to spend and demand fewer goods and services, leading to lower need for workers to produce them. Higher taxes take money out of peoples' pockets, meaning they have less available to spend on goods and services, which means fewer workers are needed to produce those goods and services.

Not all forms spending reductions and tax increases are equally harmful, but it is fair to say in general terms that austerity (i.e. spending cuts and/or tax increases) is not a way to reduce unemployment. Quite the opposite in fact: it will put more people out of work, or in the best case scenario, slow the rate of job creation to whatever is slower than a crawl.

The opposite of austerity is stimulus, that is, using saved or borrowed money to increase government spending and/or lower taxes to spur economic growth. Long story short, stimulus puts more money in peoples' pockets and works against the forces that unemploy people. The catch is, if you have no savings, you have to go into debt to do it. That's why we should save money in good years to spend in bad, but that's another rant.

We did a stimulus package in 2009 called the American Recovery and Reinvestment Act (ARRA). It undoubtedly made things better than they would have been otherwise, but it wasn't big enough to really get us where we need to be economically.

We should balance our budget, but not now. When the economy is healthy again and unemployment is lower, millions more people will have income and be paying taxes, meaning the deficit will shrink just from that. The job of balancing the budget will be easier and more humane. Hopefully we'll raise taxes and cut back our highest-in-the-world-by-a-lot military spending at that future time to balance things out. More likely than not it will require difficult compromise with something for everyone to hate.

But for now, we have to reduce the unemployment rate. When people are drowning, you don't debate how much it will cost to throw life preservers into the water. You throw the fucking life preservers into the water and worry about how to pay for them later. This is not a game. There are people who will lose everything, including their ability to survive, if we act wrongly here.

Here's an outline of what I urge you to write to all four of your federal representatives (just copy and paste your letter, it doesn't take that long):

Dear _____,

Please 1) raise the debt ceiling 2) do more stimulus to get the unemployment rate down 3) if you do an austerity package (which I am against, because the economy is currently too weak) make it as small as possible, as focused on future years as possible, and as fair as possible (i.e. half tax increases, half spending cuts).

Sincerely,
_____ your scared s**tless constituent, who always votes and will be watching.

(Okay maybe edit that last part :)

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Lo siento, pero probablemente no voy a traducir esto porque estoy muy ocupado ahorita, y una vez que lo haga, probablemente será demasiado tarde.

2 comments:

  1. Okay, granted, most Americans have four, but some have fewer. For example people who live in D.C. or the territories.

    ReplyDelete