POLITICS AUGUST 1, 2011
You don’t need to be a Congressional budget analyst to grasp one salient fact about the deal that President Obama has worked out with House and Senate leaders: It would impose drastic spending cuts, without any corresponding increase in spending, or any tax reduction, on an economy that is still staggering and that could easily fall back into a minus-growth recession. During the last two years, a major factor in keeping the wolf of a great depression at bay was federal government spending; now Obama and the Congressional leaders propose to cut it. Insane? You betcha.
Some wise and prudent people advise that it is better for Democrats in Congress to accept this deal because the alternative—a default on the nation’s debt—is much worse. It’s true that a default would have calamitous results, but the threat of default does not arise (in the manner, say, of Greece) from internal economic contradictions that must be addressed. It arises from a threat by rightwing Republicans to shut down the government if the president and the country don’t accede to their crusade against government spending. The crisis, as my colleagues have said repeatedly, is not economic; it’s political; and the president, instead of addressing it straightforwardly, has buckled under to the Republicans’ blackmail.
What should happen now? Democrats in Congress, and any Republicans who have not lost their senses, should turn this deal down. They should demand that any deal include compensatory increases in spending (or tax cuts) aimed at creating jobs and that any future spending cuts be contingent upon the economy achieving a specific lower unemployment rate—say, below 7 percent. To bring in some Republicans, the new deal could include tax cuts. Some Democrats are fixated on the expiration of the Bush tax cuts, but in my view, the government should not raise taxes (by act or expiration) as long as the downturn continues, unless it is prepared to use those new revenues to create jobs.
What happens if the Republicans, and a few Democrats, refuse to go along with this new deal? There’s a simple solution. While pointing out that the Republicans have rejected measures that would create jobs, the president should invoke the Fourteenth Amendment and end this phony political crisis. Would he do it? Of course, his spokesmen have said he would not, but his spokesmen also said earlier that he would not accept a deal that did not include revenue increases. So the president is persuadable. The problem is that the pressure has come primarily from the other side—from people whose proposals, whether wittingly or not, would wreck the economy. It’s time the president feels some pressure from people who want to create jobs rather than destroy them.
John B. Judis is a senior editor of The New Republic and a visiting scholar at the Carnegie Endowment for International Peace.