The fight to head off a so-called “grand bargain” that would end up being a grand swindle of economic recovery and opportunity for working-class Americans gets kicked up another notch today when a group of 350 prominent economists and experts release a statement warning President Obama and Congress to turn away from the “obsessive concern with cutting deficits” and focus on “jobs first.” (Click here for audio of the news conference.)
These economic experts join a growing chorus of politicians, labor officials and community leaders who have been sending the same basic message to political leaders: Cutting programs that provide economic support to ordinary Americans to make room for more tax cuts for the wealthiest will rob America of a broad-based economic recovery. In fact, the statement says, drastic spending cuts of the kind that conservatives in both parties have been arguing for could plunge the country back into the very recession they claim they want to avoid.
Several of these leaders were able to take this message directly to President Obama on Tuesday in a White House meeting. According to one news report, the meeting that included representatives from labor and progressive organizations was “more pep rally than negotiating session.” And while attendees reported they were pleased with Obama’s commitment to keep his promise to end the Bush tax cuts for the wealthiest Americans, they did not get the same iron-clad commitment to fight budget cuts that will harm economic growth.
Hence the need to keep the pressure on, especially in the face of a well-funded “Fix the Debt” propaganda campaign, supported by corporate executives who stand to gain billions from an economic policy that favors top-end tax cuts over spending on jobs for the middle class.
Among the people who have signed today’s statement are Robert Pollin of the University of Massachusetts, who is the head of the Political Economy Research Institute, Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the The New School, and Robert Kuttner, founder of The American Prospect, who helped write and circulate the statement.
Ghilarducci said that a government economic stimulus program is needed to “unleash the cash horde” of as much as $1.6 trillion being held by corporations and banks. That money is not being invested in the economy, she said, because investors do not see sufficient demand. The steps she recommends include continuing extended unemployment benefits, particularly for workers nearing retirement who should be kept in the work force so they can build up their retirement sayings; aid to state and local governments to forestall public sector worker layoffs; a school building modernization program; and continuing the payroll tax cut until it can be phased out and replaced with an enhanced earned income tax credit.
Those steps, combined with private sector investment of the cash hat is now being hoarded, could lower the unemployment rate to 5 percent in three years, she said.
Pollin has recently released a new book, “Back to Full Employment,” and launched a full employment blog, where in one post he directly takes on one of the leading apostles of the deficit-cutting brigade, John Taylor of Stanford University. Taylor endorsed Republican presidential candidate Mitt Romney’s economic plan to cut federal spending from more than 24 percent of the nation’s gross domestic product today to 20 percent by 2016, arguing such a drastic shift in federal spending is needed to erase an “exploding debt” that “portends America’s ending.”
Such apocalyptic talk is fundamentally false, Pollin explains. “Today, as we debate whether the government has the financial wherewithal to do something about the jobs crisis—the federal government is facing no fiscal crisis whatsoever,” he wrote recently. The federal government can still borrow money at record low interest rates, and the large amount of slack in the labor market is a major factor in keeping inflation low. There is no reason not to actually borrow more low-cost money now to put people back to work laying the foundations for a new period of broad-based and sustainable economic growth that will provide a much better climate for reducing the nation’s long-term debt.
In 2010, the Institute for America’s Future released a similar statement endorsed by more than 300 economic experts that warned of “a grave danger that the still-fragile economic recovery will be undercut by austerity economics.” The stalemate in Congress that came after that statement helped buttress that warning: When conservatives in Congress blocked Democratic efforts to pass a series of jobs and infrastructure spending bills, the result was job growth that barely kept pace with the growth of the labor market. That obstruction cost the economy more than 2 million jobs. But, if House conservatives had their way, it would have been worse.
Today’s statement, which will be available later today on OurFuture.org, could prove to be even more important, as Washington politicians decide in the next few weeks whether to follow the wisdom of the voters and push for jobs first or chase the folly of the deficit hawks into a new economic abyss.