Ron Paul's newly-unveiled economic plan -- promising to cut $1 trillion from the federal budget in year one (presumably that means 2013) -- is only slightly more ambitious than what we're hearing from other Republican candidates. They're all calling for major spending cuts starting as soon as possible.
What are they smoking?
Can we just put ideology aside for a moment and be clear about the facts? Consumer spending (70 percent of the economy) is flat or dropping because consumers are losing their jobs and wages, and don't have the dough. And businesses aren't hiring because they don't have enough customers.
The only way out of this vicious cycle is for the government -- the spender of last resort -- to boost the economy. The regressives are all calling for the opposite.
But even without these hair-brained Republican plans, we're heading in their direction anyway. Unless Republicans agree to a budget deal before the end of the year (don't hold your breath), the temporary payroll tax cuts and extended unemployment benefits we have now will end.
The result will be the most stringent fiscal tightening of any large economy in the world.
Together with ongoing cuts at the state and local government level, the scale of this fiscal contraction would be almost unprecedented.
It will come at a time when 25 million are Americans looking for full-time work, median incomes are dropping, home foreclosures rising, and a record 37 percent of American families with young children are in poverty.
To call this economic lunacy is to understate the point.
And if you think 2011 is bad, you ain't seen nothin' yet.
Even if you're a deficit hawk this is nuts. Instead of reducing the ratio of debt to the size of the overall economy, this strategy increases the ratio because it causes the economy to shrink.
Call it the austerity death trap.
Under these circumstances, the harder a country works to cut its debt, the worse the ratio becomes -- because the economy shrinks even faster.
Greece is already in the trap. Spain and Italy are perilously close. Even Britain, France, and Germany are tip-toeing up to it. And now us.
Deficit hawks have to understand: The first step must be to revive growth and jobs. That way, revenues increase and the debt/GDP ratio drops. Only then -- when the economy is back on track -- do you start cutting.
At the start of the Clinton administration the annual budget deficit was almost $300 billion. But rather than take a meat-axe to spending, we pushed for growth, as did the Fed. The expansion of the 1990s made it easy to get the budget under control. By 2000 we had a $226 billion surplus.
The austerity trap will even hurt Mitch-McConnell Republicans whose top priority is to "make sure Obama is a one-term president."
While it increases the likelihood of this Republican goal, it doesn't stop there. Because the austerity trap will last for many years, any Republican successor will also be a one-termer.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Andreas Souvaliotis: Could the Greek Economic Crisis Happen to Us?
The problem with being smart is that those who aren't are emotionally and permanently jealous and paranoid at the same time. They will have aversion to the smartest and best suggestions for that very reason -- they're smart and the best. And those who know they've never been "the best of the best of the best" bring to their behaviors a group-think that lynches and kills those that look different, i.e. smarter and "better" than themselves. This is the tribal behavior in reverse, those who relied upon the shaman and firemaster for survival, actually turn on and bite the hand that has been feeding them (feeding them food that's been cleansed of lethal bacteria in this example.) Anti-evolution of treating the medicre or mentally challenged now has us humans capable of thought challenged with dealings with those who aren't "rocket scientists" or capable of that level of thinking.
The robber barons plunder the booty and confuse the electorate into legislating that theft of our country's tax and infrastructure benefits. The bigger challenge is not just decrying a death trap. You have to deal with the inability of some to "get it".
Fiscal
Year Year
Ending National Debt Deficit
FY1993 09/30/1993 $4.411488 trillion
FY1994 09/30/1994 $4.692749 trillion $281.26 billion
FY1995 09/29/1995 $4.973982 trillion $281.23 billion
FY1996 09/30/1996 $5.224810 trillion $250.83 billion
FY1997 09/30/1997 $5.413146 trillion $188.34 billion
FY1998 09/30/1998 $5.526193 trillion $113.05 billion
FY1999 09/30/1999 $5.656270 trillion $130.08 billion
FY2000 09/29/2000 $5.674178 trillion $17.91 billion
FY2001 09/28/2001 $5.807463 trillion $133.29 billion
As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit. Yes, the deficit was almost eliminated in FY2000 (ending in September 2000 with a deficit of "only" $17.9 billion), but it never reached zero--let alone a positive surplus number. And Clinton's last budget proposal for FY2001, which ended in September 2001, generated a $133.29 billion deficit. Clinton clearly did not achieve a surplus and he didn't leave President Bush with a surplus.
Nope, no elephant in this room!
http://www.commondreams.org/view/2009/01/26-0
If you vote for them, you become their marks, their victims.
http://www.commondreams.org/view/2009/01/26-0
There is no amount of tax increase that will balance the budget. Not even vaguely close. No matter what tax increases are implemented, large spending cuts are unavoidable, and will only get worse as the U,S. delays. The alternative is fiscal crisis.
But Reich appears oblivious to the danger, calling for massive INCREASES in spending.
Fortunately politicians do not appear to be heeding him, and even the most spendthrift ones are starting to recognize the peril that America is in with its debt.
For 2010, the defense budget -- including overseas contingencies -- was about $664 billion. Social spending totals over $2 billion. Social Security alone is larger than defense.
http://en.wikipedia.org/wiki/2010_United_States_federal_budget#Total_spending
So ya you folks that are poor and Middle Class - keep trusting those Democrats - they are coming for your $$$ ............
nice try. you tea bags wanted to raise taxes on the 47% that pay none and keep the rates for the rich as they are
Either that or drastically cut spending. But Reich says that's a bad idea.
Read about what they are doing and understand how those that vote for them are being conned:
http://www.commondreams.org/view/2009/01/26-0
Fanned
http://www.commondreams.org/view/2009/01/26-0
That is the economic death trap that few will admit to.
We have spent 200 years burning oil coal and gas, but in terms of human history, that’s just a brief flash of light illuminating the darkness of our million years of existence; yet we see it as our normality. It isn’t, but now our lives depend on it. The concentrated energy of fossil fuel has built our civilization, provided 99% of our food, and allowed 6 billion extra people to be here who otherwise wouldn’t be.
There are just too many people after world resources, chasing jobs, money, food, and no government intervention is going to make them go away. Jobs mean using energy, but it has to be fresh energy, the kind that built iron foundries and assembly lines. ‘Job creation schemes’ just move money around, they don’t create long term employment. The government will borrow trillions to sustain the illusion of full employment, but the economy won’t kickstart itself.
The austerity death trap is real, and more scary than Reich is saying. There’s 40 million on food aid, 10% unemployed, a bankrupt government borrowing money to fight unwinnable wars, a fully armed population equating infinite consumption with holy writ. When the explosion comes, it will make the Middle East look like backyard target practice. http://www.yourmedievalfuture.com/
Wouldn't you rather have great prosperity with higher taxes on the wealthy, than our current horrible economy, where the GOPers don't want to pay for anything. BOYS AND GIRLS: Roads and schools and cops and firefighters cost money. And if you don't pay for them with taxes from the people who actually have it, there will be no new roads or teachers or cops or firefighters. You can't have the middle class and poor pay higher taxes, because they don't have enough money to make a difference. .
What part of math did GOPers fail when they went to school? It may not seem fair to some that wealthy people should pay higher percentages for income tax, but it's the only way America will survive. History show us that the only reason America succeeded in the past, was because of HIGHER taxes on those that could afford it.
During the 10 years spanning 1996 through 2005, ...
Only 42% of the people who had started out in the lowest income quintile remained stuck there. 29% of them moved into the next quintile, 14% moved up two quintiles, 10% moved up three quintiles, and 5% made it all the way to the top one.
Meanwhile, while 69% of those who had started in the top quintile remained there, 18% of them slipped back into the fourth, 7% dropped into the third, 3% into the second, and 3% plummeted all the way into the bottom one.
Source (page 7): http://www.treasury.gov/resource-center/ta...03-08revise.pdf
Meanwhile, the pie (real GDP) grew by 34%, and the per capita share of the pie (real per capita GDP) grew by 22% during that same period:
http://www.measuringworth.com/datasets/usgdp/result.php
http://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm
http://taxfoundation.org/files/sr196.pdf
The post-war era was different than now. There was no international competition. Europe was in shambles and it was still a good 25 years until "Made in Japan" would not be thought of as a nice way to say "piece of crap." The war years were focused on war production. There were no new cars. Items were not available as people wanted them. There was a huge increase in population (people like sex). Demand for housing and other goods followed.
The world is not the same now. There are major global economic competitors and trade is easy (so is migration). There is not pent up demand for goods.
You also fail to acknowledge deficiencies in use of taxes. While society may need someone to enforce laws that does not mean that law enforcement should become something that money is just thrown at. Currently overtime and odd regulations regarding pensions (at least in the only state I have knowledge of) allow people to inflate pay dramatically and use that inflated pay to be the basis of one's pension. Do police really deserve that? No. Society needs roads too, but that does not mean unnecessary or inefficient use of road funds.
I used to think that Progressives were simply out of touch with the public, but more and more they seem to be out of touch with reality.
we have seen what tax and spend liberals do and this will insure Obama's defeat and any in the Congress that back this nonsense,
Fanned
And there is a decreasing need for labor.
And more people throughout the world that want stuff (remember that under Clinton energy--oil--was cheaper because demand was still low in other nations. China exported oil until 1993.)
http://www.commondreams.org/view/2009/01/26-0
They just ACT clueless. They know what they are doing, they are scamming everyone to feed their addictions: money and power.
The world is changing quickly. The former power states in North America and Europe are losing out to emerging economies that have large ability to grow.
Austerity recognizes the nature of the world. Trying to keep borrowing to hope for growth that is likely to not occur does not.