Editorial: Whatever debt solution emerges will be the wrong one
Editorial: Whatever debt solution emerges will be the wrong oneBy the Editorial Board STLtoday.com | Posted: Sunday, July 31, 2011 12:00 am | (53) Comments
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With the nation standing on the brink of economic default this weekend, perhaps what is needed is a team of deprogrammers to descend on the House of Representatives. What we have is government not by reason or consensus or compromise. We have government by cult.
A few dozen House Republicans, most of them freshmen, have halted government in its tracks. They either don't believe the dire warnings that the government could begin to default on its debts as early as Tuesday or they don't think the consequences will be all that serious.
They don't care what economists think. They don't care what Wall Street thinks. They don't care what the leaders of their own party think. To them, cutting the size of government is everything. Some of them literally think they are on a mission from God.
Most of them don't want the nation's $14.3 trillion debt ceiling to be raised at all. Some of them might be willing to go along if (a) it were raised only modestly and they could revisit the idea in six months and (b) the deal were packaged with a balanced-budget amendment to the U.S. Constitution.
There's little reason to get lost in the specifics of the various plans offered by President Barack Obama, House Speaker John Boehner, R-Ohio, or Senate leaders. If a final plan emerges this weekend, it will be different from all of them.
Financial markets remained fairly calm last week. Indexes were down, but not dramatically. The markets radiated an eerie confidence that somehow, the adults in the room would prevail — if not by Tuesday, then surely before things get out of hand.
We are less sanguine. If a plan emerges this weekend, whether it is Democratic or Republican or a combination of both, it will not be what the country needs. The cultists have closed that door.
Any plan that emerges will bow deeply to the cult of cuts. It will cut spending too fast and too severely without offsetting them with revenue increases at a time when the economy is reeling. Pushing the economy into default is the worst thing to do. Fixing the debt ceiling with a drastic, shortsighted package of spending cuts is the second-worst thing.
Consider Friday's estimate from the Commerce Department that the economy grew at an annual rate of only 1.3 percent between April 1 and June 30. Most economists had predicted second-quarter growth in gross domestic product would be closer to 1.9 percent. The growth rate in the first quarter was pegged at 0.4 percent — barely moving. Meanwhile, the inflation rate for the year stands at 3.6 percent.
However much debts and deficits are a long-term problem, the bigger problem in the short term is the lack of growth and consumer spending. You fix that by putting money into the economy as fast as possible — payroll tax holidays, increased unemployment benefits. More spending, not less.
You rebuild confidence in the economy. Businesses invest and add jobs. You stabilize the economy before you trim it by eliminating tax expenditures (loopholes) and increasing taxes for those who can most afford it.
This is the rational approach to the problem. It speaks volumes about how deeply the cult is entrenched that rationality is nowhere to be seen.
Posted in The-platform on Sunday, July 31, 2011 12:00 am Updated: 6:17 am. | Tags: Debt Ceiling, Deficit Reduction, Barack Obama, John Boehner, Economy, Inflation,
Sunday, July 31, 2011
Editorial: Whatever debt solution emerges will be the wrong one
via stltoday.com
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