Cutting spending and raising taxes now could put a drag on the economy.
Whether we believe the Congressional Budget Office (CBO) is independent of party affiliation or not, the federal agency has ’clout’. When the Head of the CBO speaks, we generally listen. On Thursday, CBO Director Dr. Douglas Elmendorf spoke before the Congressional Super Committee. His message, be extra cautious on cutting programs and raising taxes”. Well, now that is an angle that is not often stated. His reasoning (probably well qualified reasoning) is, let things become better with the economy and then tackling deficit and national debt issues at a later date. He actually suggest widening the deficit with corrective (narrowing) measures to follow ‘later’. That is my understanding of parts of this article.
Dr. Elmendorf reasoned,
“The “most effective” budget approach, he said, “would be changes in taxes and spending that would widen the deficit today but narrow it later in the decade.”
In other words, pairing policies to spur economic growth while also enacting a longer term debt reduction plan to take effect later.
Elmendorf’s reasoning: The unemployment rate is high. Factories and offices are underused. And interest rates are already at rock bottom.
Thus, he said, “there is no inherent contradiction between using fiscal policy to support the economy today … and imposing fiscal restraint several years from now when output and employment will probably be close to their potential.”
The CBO head also spoke on other pressing Super Committee topics.
a.) the budgetary process for the future will require vastly different approaches.
Republican Sen. Pat Toomey said he’s concerned the country’s debt was already weighing on the economy and increased spending now would do more harm than good.
“I would argue that if we tolerate or aggravate the current deficit problem with the promise that we’ll work it all out in the future, that’s a very, very dangerous direction to head in,” he said.
The past is past: Elmendorf also sounded another cautionary note to lawmakers: The country’s budgetary future will look very different than its past.
b) Debt Committee urged to ‘go big’.
“Really the fundamental question for you is not how we got here but where you want the country to go,” he added. “What role do you and your colleagues want the government to play in the economy and society?”
The committee has also received a letter from experts with a central theme to ‘go big’, by past members of government (Treasury and lawmakers).
Question. Is the CBO Director speaking in the same way as folks who recommended a larger stimulus plan in 2009? Is he suggesting the Committee should allow for more deficit spending to spur the economy and fix the deficit problems later? Are those almost one in the same? Well, probably not but there is something working kind of like and ‘surf under-tow’ in Dr. Elmendorf’s message to the committee. Is he implying that the entire issue is ‘a manufactured’ issue as to timing and for political reasons?
Elmendorf’s follows his caution with clear messages to ‘go big’ in pursuing the mission of the Super Committee. He does so at the very same time that Eric Cantor and the republicans in congress start their typical ’whittling away’ at Administration proposals. The GOP’s current target is the American Jobs Act legislation. Now, that is a real surprise!
If you we look a little closer at related issues critical to our economy, we find that more people are living below the poverty level. CNN Money has published a couple of articles about the recently released information. The picture is not a pretty picture in any sense. People from all backgrounds are now finding themselves, headed for the unenviable ’quagmire’ of statistical poverty.
We have more people moving into poverty, unemployment that is stubbornly hanging around 9.0 percent, a Super Committee charged with reducing working to repair deficit and national debt issues, the House milling and mulling over the president’s jobs bill; we have without questions a state of bleakness that will require major bi-partisan cooperation in Washington D.C.
The issues are very serious both short-term and long-term. I also posit that in the very long-term, we are inadvertently building-up towards major class divisions in the nation. ”Classism” in the United States could lead to dire consequences far beyond the unrest and unstable markets we have observed in England, Greece and other European nations.
The answers may very well reside in the voting public vs. the self motivate agendas and interest in Washington D.C. Example, If 70 per cent of people of voting age feel that our government should pursue a balanced approach on tackling deficit and national debt issues, why is congress not being forced to consider increasing revenues? Why are voters sitting and allowing Cantor, the Tea Party and McConnell continue to play politics games?
All voters must remember that Cantor, Boehner, and McConnell supported every Bush Administration initiative from 2000 – 2008. They do not have a tack record that one should follow.
Their path is not a path of less risks.
The CBO Director speaks to the Super Committee, people are increasingly slipping below the poverty level, corporate profits are at an all time high, CEO compensation is at an all-time high, unemployment is sitting at 9.1 per cent.
Do you notice that each word in the previous paragraphs has much more negative impact on people who earn in the middle-income brackets?