The REAL Fiscal Cliff: What’s the Solution?

To dent our debt, we need to return to proven Keynesian economics. The simple fact of life is that deficits grow during a recession.

The solution is also simple, and proven.  Create demand by passing a jobs bill that targets the long-term unemployed, recent graduates and older workers, and, yes, increases the deficit in the short term.  Getting folks back to work would dramatically reduce the deficit by helping the economy grow and reduce expenditures for social services. As Ezra Klein said over a year and a half ago, “A little bit of stimulus could buy you a lot of deficit reduction.”

On the other hand, hard data debunks the Republican mantra that tax cuts create jobs.  They have never really believed this.  Just listen to top executives on Bloomberg News or read between the lines in money magazines. The reason businesses aren’t investing is not because of taxes, but because there is a lack of demand.  Demand comes from consumers, most of whom have seen their wealth evaporate during the past or who fear that their job may be on the line.

There is a growing body of evidence that tax cuts actually reduce economic growth.  In fact, high taxes may be associated with higher growth.  Spending cuts were never designed to create growth, they were always designed to “starve the beast” of government coffers so that popular government programs that conservatives had never been able to get rid of would finally make it to the chopping block.

Cutting expenditures to programs designed to support the poor and middle class will reduce demand and cost jobs. If you want to look at how well austerity works, look to Greece. Now is NOT the time to talk Medicare, Medicaid or Social Security cuts or huge deficit reductions. In addition, while the top one percent made out like bandits during this last recession and the previous 30 years, the middle class and the poor have been crushed by this economy.  The middle class lost almost two decades of economic gain while the rich pocketed their pain.  For blacks, the economic devastation was even worse, setting them back for a generation.

Instead of Democrats taking “tough choices” that would cut into the social safety net, showing real spine would demand tax increases for income above $250,000 AND a jobs bill.  For long-term prosperity, the country desperately needs increased spending on infrastructure including in green energy and energy efficiency; affordable quality education; safety; roads; bridges; climate change and jobs, jobs, jobs.  For most Americans, buying into Republican austerity is the real fiscal cliff.  Millions have already lost their homes, their jobs and their retirement funds.  A recession caused by bad economic policy is a cliff from which millions of citizens will never recover.

Please take five minutes today to call 202-224-3121 and ask for  each of your two senate and local congressional representatives.  Leave a personal message for President Obama at the White House number: 202-456-1111.

If you have five minutes more, write a letter to your representatives. This site also lets you track how your representatives voted (put in your zip code) on various issues and links you directly to congressional sites. Your zip code also pulls up a quick click list of local and national print media (same page, further down).  You can send a letter to the editor that reflects our need for real deficit deductions by getting the middle class back to work.  If you have a personal story of how this issue affects you directly, please include that in your letter for maximum impact.

Lillian Davis

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