The Precipice Of Economic Failure

Do Republicans really care if the economy takes a tumble? Do they care if families are unable to send their kids to college, if public schools are unable to adequately teach our children, if the shrinking middle class have wages that are stagnant on top of the fact that healthcare costs are increasing, college tuitions and food prices are sky rocketing and having an effect of lowering wages even more? 

No. Their stance on this debt ceiling debate is proof positive (not to mention Eric Cantor’s portfolio is increasing on the fact that the debt ceiling hasn’t passed). Washington Post columnist Eugene Robinson put it best.

There’s no dispute about where we need to go. The question is what path to take.

Clearly, the federal government cannot continue spending at a rate of 25 percent of GDP while taking in revenues that equal less than 15 percent of GDP, as is the case this year. We would reach the point where debt service crowds out health care, education and other priorities dear to progressives’ hearts. Major investments the nation desperately needs to make — for infrastructure and energy research, for example — would be impossible. Decline would be inevitable. 

The way to avoid this dystopian future is to bring spending and revenues more into balance. Yes, there will be some pain and sacrifice. But it is not necessary — nor is it wise — to heap a disproportionate share of the burden onto the backs of the poor, the elderly and the battered middle class.

Economists around the United States of both parties are all in agreement that the GOP’s stance of only cutting entitlements without raising revenue does nothing but hurt this economy. In order to turn this economy around, we need to employee people who are then able to spend money, which in turn will help businesses and help create more jobs.

Their plan for resolution to our financial crisis, cut as many government jobs as possible, cut our social safety net (Medicare, Medicaid, and Social Security) is not the right plan.  

The fact is, corporate tax rates that are being protected by GOP, and the loop holes used by the wealthiest in this country to skirt around the IRS and pay virtually no taxes is where we need to look. 

The nominal corporate tax rate of 35 percent is a joke, since big corporations don’t actually pay that much; those loopholes, too, could be eliminated. Then we could look at measures that would have broader impact — say, hiking or eliminating the income cap for Social Security payroll contributions. 

The point is that it doesn’t take much imagination to get within shouting distance of $2 trillion in deficit reduction over 10 years — looking at the revenue side alone. That’s half of the $4 trillion that both Republicans and Obama have set as a target. 

There would have to be an equal amount of spending cuts. But what sense does it make to begin with the small slice of the pie — less than 20 percent — that is being called “discretionary” spending? It’s just not possible to find enough savings there. 

Also, Eric Cantor’s plan for all cuts without revenue increase is counterintuitive. In Steven Benen of Washington Monthly’s latest op-ed he writes how this plan is wrong for our economy.

The more pressing problem with Cantor’s contention is that it’s largely Keynesian — and Cantor hates Keynesian economics. Jon Chait had a good item on this. 

[I]f you think the state of the business cycle should influence your fiscal policy, then you should oppose any spending cuts at all, and the tax cuts you support should be as progressive as possible. Alternatively, if you’re worried about the incentive effects of tax cuts on business and the rich, then you don’t care about whether unemployment is high or low at any particular moment. Cantor’s position, which is the universal Republican position, is pure nonsense by absolutely any standard, including the most conservative standard. 

That’s even aside from the fact that nobody is proposing an immediate tax hike. Democrats are perfectly happy to phase in any tax increase slowly. Cantor’s argument is nonsense economics piled on top of a factual misrepresentation.

Most of Cantor’s arguments are.

Regardless, Chait’s point is an important one. Why does Eric Cantor oppose any and all tax increases? Because, as he sees it, the economy is weak, and if there are tax increases, it would take money out of the economy and put into the Treasury. That would be wrong, Cantor believes, because we want that money in consumers’ hands, generating economic activity. 

In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury.

Do you see the disconnect? Well, you probably do, but the Majority Leader doesn’t.

Let’s put this another way: the policy reasoning that tells Eric Cantor that tax increases are a bad idea is the same policy reasoning that makes sweeping budget cuts a bad idea, too.

The fact is Republicans are sending us down a path of economic despariety. The median income of middle and lower classes have stagnated and with their proposed cuts will further reduce incomes and make things like college for our children an impossibility.

Only a select few are feeling the effects right now, but I hope it will not come for the majority of Americans to feel these repercussions before we realize the disastrous path our choices have taken us down.

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