Congress: Do Not Prescribe the Wrong Medicine for Our Fragile Economy
Feb 01, 2013
Following the November elections, voters overwhelmingly reported that jobs were their number one concern, far greater than deficit reduction. This week's economic report showed that the economy contracted slightly in the last quarter of 2012, and today's jobs figures showed that unemployment remains elevated at 7.9 percent. Long-term unemployment remains a problem as nearly five million workers have been jobless for six months or more. This news confirms that the recovery is still fragile and that we have a long way to go to get back to full employment.
But Congress has not taken action to support job growth - and in fact, is threatening to make matters worse. There is growing concern that Congress will allow "sequestration" - deep automatic across the board cuts to Medicare, domestic discretionary spending, and defense spending - to take place starting in March. These cuts, originally included in the Budget Control Act of 2011, were never intended to take place. Rather, they were designed to be so unpalatable as to force both Democrats and Republicans to the negotiating table over long-term deficit reduction. If these cuts are left in place, bi-partisan analysts predict that they could cost the economy a million or more jobs over the next year.
It would be a mistake to allow these deep cuts to take place at a time when the economy is still fragile. A number of the programs subject to the sequestration, including education and workforce programs, are supporting the economic recovery by helping people find jobs and by investing in the skills that employers will need to expand. Deep cuts at this time would be counter-productive. Moreover, as the UK has learned, austerity can actually increase deficits, as tax revenues decline and need for services increases when people do not have jobs. We need a balanced, long-term path to deficit reduction that includes additional revenues and immediate action to support job growth.
All can agree that our economy needs medication. But the harsh medicine of indiscriminate cuts is not the pill that we need. Like the blood-letters of medieval times, it is likely to leave the patient worse off.