My Fellow Americans,
You and I have been hearing a great deal of advice about the importance of cutting the federal deficit. As part of the challenge of restoring America to a condition of economic soundness, we do need to lower the deficit and bring down the national debt relative to our total economic output.
But a lot of the Cassandra voices have the sequence backwards. Right now, we have more urgent business than cutting the deficit.
Thirteen million Americans are out of work, half of them for six months or more. Twelve million more Americans are working part time but want full time jobs, or have given up even looking because there are so few job openings to be had--five people seeking work for every available job vacancy. Even the official unemployment rate is stuck near ten percent.
The last few months have been disappointing. The private sector has begun generating some jobs, but not nearly enough. In May, there were more than 400,000 jobs created, but nearly all of them were temporary jobs with the U.S. Census Bureau. Just 41,000 were private sector jobs. We are never going to put America back to work at this pace.
The private sector is not generating enough jobs because private business isn't entirely confident that this recession is fully over. Businesses are not willing to invest enough or to hire enough. And who can blame them? With nearly ten percent of America's workforce unemployment and anxious, families are watching every penny.
We averted a Great Depression, but this is not good enough. Workers idle, businesses hesitant to invest and hire, consumers deferring spending--that's a recipe for a Great Stagnation.
If America found itself in an all-out war, we would spend whatever it took to be victorious, as our grandparents did during World War II, and our parents did during the Cold War. In those years, we bought a lot of prosperity as an incidental byproduct of our military buildup. If we can spend what it takes to defeat a foreign enemy, surely we can spend what's needed to vanquish the risks of permanent recession.
In many ways, our current economic situation is as dire a threat to our way of life as a war. We face the risk of a stunted generation: Young people who feel like failures before their adult lives have really begun, because they were born at the wrong time. Elderly people who have lost much of their home equity, and their 401 k savings, and either have no pensions or face financial threats to the ones they have. People in the prime of life who are losing everything they have struggled for, including their self respect--all through no fault of their own.
In these circumstances, you have to have a heart of stone to be calling for cuts in Social Security and Medicare, or new taxes on the struggling middle class, as the cure for deficits that are mainly the result of the recession itself. But there are billionaires who lead lives of ease who want struggling Americans to tighten their belts as the solution to a deep jobs recession created by excesses on Wall Street.
I reject their values and I reject their counsel, even as I embrace a better strategy to return America to fiscal and economic health.
Today I am sending Congress legislation that will spend an additional $500 billion in this fiscal year and $500 billion next year, to put America back to work; to refinance mortgages at affordable monthly payments so that housing values stabilize; and to stop the hemorrhage in state and local finances that are leading to cuts in services and layoffs of workers. The money will also finance an emergency Reclamation Corps along the Gulf Coast.
Virtually all Republicans, and even some members of my own party, have refused to approve the smaller sums that I have asked Congress to authorize--money to extend unemployment insurance, and emergency COBRA coverage for people who've lost their health insurance; and to keep 300,000 schoolteachers from being laid off. They block this urgently needed help, either because they are ideologically opposed to government playing its necessary role in a national emergency, or because of concerns about the deficit--concerns that never bothered Republicans when they were increasing deficits to pay for tax cuts for the wealthiest, or needless wars of choice.
Some of these legislators represent America's hardest hit communities. If they vote against this bill, let them explain themselves to America's unemployed workers and their families; and to breadwinners losing their healthcare; and children losing their teachers. I may not succeed in getting Congress to appropriate every nickel of this request, but I am going to fight for this recovery package like I have never fought before.
There are those who say that we need to cut the deficit to reassure financial markets that are worried about inflation. I wonder if these people read the financial pages. Today, the money markets are willing to lend the U.S. government money, by buying government bonds, for thirty years at about four percent. A normal rate of return is around 3 percent. That means markets believe that the next thirty years will be almost inflation-free.
When markets behave like this, it means inflation is the furthest thing from their minds. And, there is not much inflationary pressure when the economy is becalmed. As chief executive, it would be irresponsible of me not to take advantage of this borrowing climate to invest in the jobs America needs at very low borrowing costs to the taxpayer.
Now, what about that deficit? Yes, it is too big. But the best and least painful way to get it under control is to put America back to work, so that more workers and businesses are paying taxes again.
The previous administration dug us quite a hole. And even a full recovery will not quite solve all of the long term deficit and debt problem. But it would be insane and perverse to tackle the deficit before we achieve the recovery. We will need to increase some taxes, but I pledge to you that they will not be taxes on the middle class.
And although we need to run an efficient government as possible, I further pledge to you that we will not balance the budget on the backs of Social Security or Medicare. If my Republican friends think that course necessary policy or smart politics, let's have that debate.
Now, the fiscal commission that was jointly appointed by the Congressional leadership and by me is charged with recommending a long term plan to get the budget back to near-balance, after we achieve a full economic recovery. I support that goal. And I expect the commission to produce a plan that does not tamper with social security or raise taxes on the middle class. Otherwise, it goes straight into my waste-basket.
I also expect the Commission to recognize that recovery comes first. I will look forward to a report that proposes a plan to fiscal stability built on a strong recovery. I will reject one that is built on austerity.
Recently, people as different as David Walker of the Peter G. Peterson Foundation, and Lawrence Mishel of the Economic Policy Institute have agreed that we need more deficit spending in the short term so that we can create more jobs now and get to eventual budget discipline in the future without further needless economic sacrifice on the part of American working families.
To those who commend belt tightening, I remind you that for three years now, working Americans have been tightening their belts--and worse. Why is it always those with ample waistlines who want others to make sacrifices? Let them lead the way, by stepping aside and not resisting tax reform, or financial reform, or adequate public investment to put America back to work.
We need to be focusing on possibility, not on austerity. That will be the great cause of my presidency.
Robert Kuttner's new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior fellow at Demos