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Reality is Calling... The Problem Isn't Deficits It's Jobs!

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DEBT CEILING

The only surprise is that it happened so fast. The cacophony of right-wing talk about how we need to "cut spending" to create jobs reached a fever pitch in the debate over the deficit ceiling that culminated just days ago. Now the world economy is sending a stark message that makes such talk sound stupider and stupider by the minute. The "conventional wisdom" is getting whiplash.

As markets tumble and job reports show no growth, it is crystal clear to anyone with even a passing acquaintance with economics that Republican budget cutters are completely, utterly wrong. In fact they are 180 degrees off course. They are trying to do exactly the opposite of what the economy needs in order to grow and create jobs.

History will remember them the same way it views their ideological progenitors that in 1937 decided Roosevelt's New Deal had gone too far and needed "fiscal discipline." That led to a sharp end of the economic recovery and a renewed downward plunge into joblessness. We've seen this movie. It's a disaster film.

Beohner, Cantor and Ryan and the whole gang are like a group of Medieval doctors who think that the way to treat disease is by "bleeding" patients. It may have made sense to the Medieval mind, but it was dead wrong.

It should shock no one that when they ran out of money, state and local governments laid off hundreds of thousands of workers who would no longer be able to buy products and services. In fact the loss of half a million public sector jobs this year has almost completely offset private sector job growth. The workforce lost 37,000 more government workers in July. That is one of the reasons why the economy generated only 117,000 jobs in July, below the 150,000 needed to keep up with population growth.

But instead of providing more funds to state and local governments to maintain schools and other public services, the Republican answer is that we must cut further and faster -- meaning that there are fewer jobs, fewer consumers, less economic growth and a deepening cycle of economic stagnation.

The problem with the economy is not "confidence" -- it's consumers.

Businesses aren't sitting on almost two trillion in cash because they are timid. They don't invest in hiring new workers, or building new plants and buying equipment because they don't see any new consumers to buy the products or services they would produce.

The only way to break this dangerous cycle of economic stagnation is for all of us together -- through our government -- to band together and put people who can't find jobs back to work producing things that we all need. That jumpstarts the economy by putting paychecks in people's pockets so they will buy products. All of those businesses will see customers out there again and will hire new workers, build new plants and buy equipment.

This should not be a hard concept to grasp, but Republicans like to cover their eyes and ears and hum as if that will make the truth about what is necessary to restart the economy go away.

Virtually every economist in America agrees that the Obama stimulus package created millions of jobs. The problem wasn't that it didn't work to create jobs. The problem was that it wasn't big enough to create enough jobs. And now the economic data indicates that Bush's Great Recession was even more severe than we knew at the time, and there is little question that the proper response would have been much greater levels of economic stimulus than Congress ultimately passed -- not less.

America was perilously close to a new Great Depression. The Stimulus Bill stopped that -- but it was far too small. Our problem was not "runaway government spending" over the last several years -- it was too little government spending. As for the deficit, increasing taxes on the wealthy would have done little to slow economic demand. Rich people demand all the goods and services they need with or without tax breaks. Increasing tax rate on the rich would have taken a bunch of that cash that got hoarded by the wealthy and put it instead into pay checks that would have turned into the tonic the economy really needed: more economic demand. And it would have addressed problem of the long-term budget deficit at the same time.

The Republicans incessantly argue that we can't tax "job creators." Job creators are not the rich that hoard their money. They are the everyday Americans who need money in their pockets to demand the products that will give businesses a reason to hire and invest.

Some of the "mainstream" media has been complicit in this misdirection of the American political dialogue. The Washington Post's editorial page is obsessed with the need for more "fiscal discipline."

Yes, we need to reduce the long-term deficit, the same way we did in the '90s, by demanding the wealthy and big corporations pay their fair share -- and by generating economic growth. But the most important part of that formula is the economic growth.

Many of the talking heads go on endlessly about how there are only three factors that affect the deficit: revenue, spending and the cost of government borrowing. But that's wrong. The fourth factor -- and the most important factor -- is the level of economic growth. The level of economic growth actually has more impact on the overall deficit than any other factor. And to have economic growth in the future, we need government action to put people to work now.

Now the worst enemy of our economy is the notion that there is "nothing we can do." All sorts of "serious" writers say, well, the Fed has lowered interest rates as far as they can go, and the stimulus is winding down -- as if the stimulus "winding down" is an act of God.

Of course there is something we can do. We can actually create jobs.

Putting people to work is not an intractable problem that is mysterious. For about $220 billion you could put over two million Americans to work for two years --- and massively lower the unemployment rate.

I'm not talking about "incentivizing" companies, or cutting tax rates, or providing "stimulus." I'm talking about funding specific job slots at state and local governments and the National Parks. I'm talking about hiring people directly, the way Roosevelt did it during the last great American jobs emergency.

You'd fund specific jobs -- the same way that Clinton did for the 100,000 cops in the COPS program in the '90s. You'd have a teacher corps, a school improvement corps, a parks improvement corps. You'd fund slots for fire fighters and home health care workers.

You would create jobs by actually creating jobs. And you could fund it by raising the tax rates on millionaires and billionaires.

Time for us to snap out of our deficit fixation-induced stupor and realize that unless we act, the American economy is indeed headed over the cliff as a result of Congress' unwillingness to act to pass a real emergency jobs bill.

Call Congress. Tell them one simple message: America's problem isn't deficits. It's jobs.

Robert Creamer is a long-time political organizer and strategist, and author of the book: Stand Up Straight: How Progressives Can Win, available on Amazon.com. He is a partner in Democracy Partners. Follow him on Twitter @rbcreamer.

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