It would be difficult to imagine residents of a coastal city failing to evacuate and flee to higher ground upon learning that a tsunami was fast approaching, and especially if that city had been ravaged by a tsunami just the year before. Last year, America’s economy and good credit was nearly ravaged by recalcitrant Republicans who refused to take a balanced approach to deficit reduction of increased revenue coupled with responsible budget cuts, and it resulted in automatic spending cuts that will be implemented at the beginning of 2013. It was bad enough that Republicans failed to heed the warning last year that failure to increase revenue and cut spending would stunt the economy, but they are taking the same approach this year despite a warning of a deep recession.
On Wednesday, the nonpartisan Congressional Budget Office issued a dire warning that the economy will enter a recession if the country goes over the fiscal cliff. CBO Director Doug Elmendorf said “The stakes of fiscal policy are very high right now, and the sooner that that uncertainty is resolved, the stronger the economy would be in the second half of this year. Economic growth right now is being held back by the anticipation of this fiscal tightening.” At issue is allowing all of the Bush-era tax cuts to expire, steep across the board spending cuts that will cost 2 million jobs, and middle class tax increases that will cause the economy to contract. President Obama has called for extending the Bush tax cuts for 98% of Americans and measured spending cuts, but Speaker John Boehner and Republicans in Congress are holding out for extending all the Bush rates and making cuts to mandatory social safety nets.
As usual, Democrats asked Republicans to agree to a “balanced deficit package” (again) that includes raising tax rates on the wealthy to the level they were paying during the Clinton administration and tailored spending cuts, but like last year, Republicans are doubling down and insist that the only deficit solution is one including huge cuts to non-defense social spending and extending the Bush tax cuts for all income earners. If it sounds like a replay of last year’s deficit committee failure that put the country in the position it is in, it is. Subsequently, House GOP Conference Chairman Jeb Hensarling (R-TX) repeated the same tired Republican response that “President Obama’s higher taxes, runaway spending, and debt are endangering our nation’s economy, our national security, and our children’s hope for a better future.” It is the same crisis, with the same response from Republicans who are still decrying higher taxes and increased spending, regardless that taxes are at their lowest rates in 60 years and spending under President Obama is lower than the Reagan, Bush I, Clinton, and Bush II administrations.
As a reminder, during last year’s budget committee debacle, Republicans opposed the President’s $4.2 trillion deficit reduction deal and settled for $1.2 trillion in cuts scheduled to take place at the start of 2013. In President Obama’s deal, Bush tax rates were kept in place for 98% of working Americans and spending cuts were spread across the board that, by the way, would have saved the country’s stellar credit rating from being downgraded. S&P cited Republican intransigence in allowing the Bush-era tax cuts for the wealthy to expire instead of spending cuts and revenue increases as part of a balanced approach as the only reason they downgraded America’s credit rating. Republicans obviously do not, and will not, take a balanced approach to anything.
It is important to note that if Willard Romney wins in November, his plans for the economy and taxes will put the nation in a worse economic recession than Republican inaction going into 2013. Romney plans draconian social program cuts, huge tax cuts for the rich, and tax increases on the poor and middle class. The problem with Republican inaction this year and Romney’s plan is that the middle class that drives the economy will be hampered with higher tax rates, and combined with job losses from spending cuts, the economy will suffer a deep recession. Republicans either cannot, or will not, acknowledge that tax cuts for the wealthy do not stimulate the economy or create jobs, and unlike 98% of Americans, the rich do not spend as a result of lower tax rates; they hoard their money in offshore tax havens. Poor and middle income families will spend the money they save from lower taxes immediately stimulating the economy and creating new jobs.
It is up to Congress to take urgent steps to replace the sequestration cuts with balanced deficit reduction that puts the wealthiest Americans and largest corporations back to Clinton-era tax rates that created 23-million new jobs and a record budget surplus. However, Republicans cannot be expected to take the right step of extending tax cuts for 98% of Americans and 97% of small businesses because it helps the poor and middle class, creates jobs, and helps grow the economy. Republicans claim the only remedy for stronger economic growth and more jobs is more tax cuts for the rich and drastic cuts to social programs that put the nation in the precarious economic position we find ourselves; again.
The CBO said less fiscal tightening will result in economic growth of 1.7% in 2013 and unemployment at 8%, and with greater fiscal tightening the economy will experience .5% negative growth and unemployment rate of 9.1%. Republicans will not accept anything less than austerity measures that guarantee to kill 2 million jobs in 2013 and retard the slow but steady growth the country is now experiencing. The CBO also suggested uncertainty caused by Republican intransigence will further erode economic confidence in the latter half of 2012, as congressional inaction means the policies triggered by the 2011 debt ceiling deal raises taxes on all income earners, makes sharp cuts in Medicare doctor payments, and imposes automatic spending cuts that would never have taken place if Republicans had agreed to President Obama’s balanced approach that cut the deficit by $4.2 trillion.
According to Speaker Boehner, Republicans will settle for nothing less than cuts to mandatory spending on social safety nets like food stamps, and extending tax cuts for the wealthy. If there is one thing to say about Republicans, they can be counted on to make the same fatal economic errors they made last year and it will have worse economic consequences because after last year’s debacle, economic recovery is uncertain and by raising taxes on the middle class, 2-million jobs will disappear, economic growth will cease, millions of Americans will fall into poverty, and all the while, the wealthy will continue hoarding their money like they have for eleven years they have had their Bush-era tax cuts. Now, imagine a Romney economic plan with larger tax cuts for the rich, tax increases on the poor and middle class, increased defense spending, and draconian cuts to social safety nets and the recession the CBO warned about Wednesday becomes a major depression that will not affect Willard Romney who will still be hiding and hoarding his millions and paying a tax rate of about one percent, and that is not a warning, but a very tragic fact.