On planet Washington, where reducing the federal budget deficit continues to be more important than creating jobs, everyone is talking about "triggers" that automatically go into effect if certain other things don't happen.
Yet no one is talking about the most obvious trigger of all -- no budget cuts until the official level of unemployment falls to 5 percent, its level before the Great Recession.
The biggest trigger on the minds of Washington insiders is $1.2 trillion across-the-board cuts that will automatically occur if Congress's super committee doesn't come up with at least $1.2 trillion of cuts on its own that Congress agrees to by December 23.
That automatic trigger seems likelier by the day because at this point the odds of an agreement are roughly zero.
Here's the truly insane thing: The triggered cuts start in 2013, a little over a year from now.
Yet no one in their right mind believes unemployment will be lower than 8 percent by then.
The cuts will come on top of the expiration of extended unemployment benefits, the end of a payroll tax cut, and continuing reductions in state and local budgets -- all when American consumers (whose spending is 70 percent of the economy) will still be reeling from declining jobs and wages and plunging home prices. Even if Europe's debt crisis doesn't by then threaten a global financial meltdown, this rush toward austerity couldn't come at a worse time.
In other words, what will really be triggered is a deeper recession and higher unemployment.
Democrats on the super committee are acting as if they haven't met an unemployed person. They're proposing $2.3 trillion in deficit reductions -- half from spending cuts (including $350 billion from Medicare), half from tax increases. To make the tax increases palatable to Republicans, Democrats want to give Congress a chance to find the new revenues by overhauling the tax code. If that effort fails, automatic tax increases would be triggered. The top tax rate won't rise (another bow to Republicans) but top earners' itemized deductions will be limited.
Oh, and by the way, under the Democrats' proposal, spending cuts and tax increases, triggered or not, would start in 2013.
The President (remember him?) is still hawking his $450 billion jobs bill, but he's having a hard time being heard above the deficit-reduction din -- in large part because he himself is simultaneously calling for deficit reduction, and most people outside Washington can't make sense of how we do both.
The public is confused because they don't get it's a matter of sequencing. We need to do more spending now in order to bring back jobs and growth, then do less spending in the future -- after the economy is once again generating jobs and growth.
That's why it make more sense for Democrats to propose a deficit reduction plan that goes into effect only when jobs are back. The trigger should be the rate of unemployment -- and a 5 percent rate would signal we're back on track.
True, the unemployment rate is an imperfect measure of how bad things are (it doesn't include everyone who's working part-time but needs a full-time job, and those too discouraged to look for work), but at least it's a useful way of comparing how much worse or better we are than we've been. And it can't be fiddled with (the Bureau of Labor Statistics guards the calculation like gold in Fort Knox).
Deficit hawks in both parties fear if we put off the spending cuts we'll never do them. But if we cut now, the ratio of deficit to the total economy just gets worse -- because the economy stagnates and the swelling ranks of unemployed don't pay taxes.
So the best of all worlds is to have a big jobs plan now, and also commit to automatic cuts triggered when unemployment falls to 5 percent.
The hawks should find this acceptable. Reasonable Republicans (if any are left) will, too. Democrats, if they still care about jobs, should lead the way.
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
Robert Kuttner: The Superfluous Super Committee
Aloysius Boyle: Battlefield to Boardroom -- Combating Veteran Unemployment
Richard (RJ) Eskow: If the Super Committee Doesn't Cut Your Medicare, Santa Claus Will Die!
But of course, you don't stand a chance of getting elected; you make too much sense!
1. They certainly DO have the tendency or desire to shoot a firearm before adequately identifying the target.
2. They sure ARE inclined to react violently at the slightest provocation.
3. They DO tend to act rashly or without due consideration (tending to resort to the use of violence irresponsibly).
4. They DO tend to show a lack of care for consequences; "behaved like an irresponsible idiot"; "hasty and irresponsible action".
Even Attila the Hun is thought to have said, "Violence never solves anything."
& stating the obvious here - 'Cui bono?'
The American people need a 'bullet proof soul.'
Thanks & respect for being a voice of reason (I'm adding your thoughtviews to my bulletproof vest).
But why should Robert have all the fun? Other pundits should get to move their priorities to the head of the line, too. Maybe Congress should be allowed to do something about deficit spending…
Only after the minimum wage rises to (insert arbitrary hourly rate here).
Only after the U.S. reduces carbon emissions by (insert Al Gore’s latest).
Only after the nation’s epidemic of Fritos addiction is cut by (insert percentage).
Only after (insert percentage) of first graders have access to condoms.
Only after everyone earning over (insert yearly income) is forced to grovel on national TV.
In fact, there’s no reason we can’t adopt all those rules. Special interests, reserve your favorite lobbyists now. Suggestions like Reich’s will let us go on deficit spending forever. Or until we have nothing left to spend.
And they don't serve the needs and wants of the 1%.
In addition to delaying the requisite deleveraging, this strategy also rewards those most guilty of over-extending themselves (banks, homeowners, etc.) and places the burden on responsible taxpayers. And some tactics, like extending unemployment benefits, have actually been proven to PROLONG unemployment, delaying recovery still further.
There are times when no good deed goes unpunished.
Keep going on CNBC at least to lend a voice...but none of this will be changed until Americans demand the change.
I have faith. I do believe the American People are slowly waking up. And I also believe there are many Americans who really love our country. And, if push comes to shove, we will rise to protect and preserve this great country.
Best to you.
Banker supporting OWS and ethical capitalism.
Stan from CA.
I suspect they haven't actually....
John Kerry is our Senator.....he lives in a 10 Million Dollar Brownstone on Beacon Hill in Boston....and spends his spare time on Martha's Vineyard sailing his 7.5 Million Dollar yacht or in Gstadd Switzerland skiing....I doubt he see's or has met many unemplyed people....
• United States Tax revenue: ....... $2,170,000,000,000
• Fed budget: ............................. $3,820,000,000,000
• New debt: (this Year) .............. $1,650,000,000,000
• National debt: ...................... $14,271,000,000,000
• Recent budget cut: ...................... $ 38,500,000,000
Now, remove 8 zeros from each line and pretend it's a household budget.
• Annual family income: ................................ $21,700
• Money the family actually spent: ................. $38,200
• New debt added to their credit card: ........... $16,500
• Outstanding balance on their credit card: ... $142,710
• Total budget cuts for coming year: ................... $385
Sorta brings the issue "home" doesn't it?
try taking that balance sheet to your local banks and getting a loan...for a house or to buy anything...
Think of it this way. That $3.8 trillion in government spending is actually the creation of $3.8 trillion dollar bills that are dumped into the economic system. Taxation is actually the destruction of $2.2 trillion. The difference is the money left in the system to do work. This is true because only government is allowed to print money.
Now, if the system is stagant, as it is now, pouring more money into an already money saturated pool, does nothing. The only real way we can get money flowing, using the pool analogy, is to cut a larger hole in the bottom of the lake. In other words, we need to tax more while also spending less (though spending less is not really necessary depending on the type of taxes you inact).
As to the debt, the only real problem with the debt is the amount of interest that is owed on it. That interest detracts from the services that government could supply.
Simplify... Government has no money unless they print it, borrow it or tax us for it. All of those activities take from us eventually.
Government spending doesn't stimulate anything long term (and if you give it to unions... never)
To use your water analogy, government spending is like scooping a cup of water off your dock and pouring it back into the lake off your neighbor's dock. In the case of the federal government spending... you slosh a portion on the ground on the way to your neighbor's dock.
The private sector is the lake. The more you scoop and slosh... the less water is in the lake. Eventually the private sector (the lake) is gone and you have what the progressives want... socialism, Marxism or communism.
You also have the destruction of the democratic republic that has worked so well.
You will never, ever, ever be an Economist. You will never, ever, ever be in finance. Are you from this planet???
Yes, the rate of spending is unsustainable but in the long run, not immediately. If we put more people to work as we did in the 90's with "full employment" we increase our revenue at all levels of the government and in our businesses as well. But we stay stalled in this situation because there is no help coming from the Republicans to change things. Instead, we only hear about cuts and not growth.
Enough with the Chicken Little hyperbole...