Sequestration

Is a fancy word: it means, in the memorable phrase of Congressman, Sean Maloney, "Congress screwing up the economy for no reason."

It's true that the projected government deficit is over $1.1 trillion, a mind-boggling number, but cutting spending would make that number worse. Why? As the miniscule retreat in GDP last quarter demonstrated, when we cut government spending, the whole economy is negatively affected. We teeter between recovery and renewed recession. Further, the experience of European countries, demonstrates that austerity does not create prosperity; it created renewed recession in the UK (triple dip) and depression in Greece.

The "sequester" has the Republicans worrying about cuts to Defense, complaining that this will cost jobs (it will), but they're not worrying about, and want to increase cuts to domestic programs. The cuts already mandated would not only cost even more jobs (civilian programs create more jobs per dollar than defense), but they would hurt our most vulnerable, and our future prosperity.

Cuts to domestic programs will: cut 70,000 children from Headstart, deny treatment to 373,000 mentally ill (adults and children) and reduce small business loan guarantees by $540 million. In addition, the $85 billion in cuts on Mar 1, could include, according to Congresswoman Nita Lowey, "furloughs of air traffic controllers, food inspectors, border patrol, reduced investment in safe drinking water and medical research, diminished military readiness and embassy security."

Think about this logically: if you reduce expenditures March 1st by $85 billion, how is that going to help us recover from the Great Recession? It will cut that amount of money (US multiplier estimated at 1.29 to 1.73) from flowing into the economy, cutting jobs, cutting purchases--as well as needed services. It won't "grow" the economy; it will shrink it by at least $109 billion--in one month.

Greece, subjected to radical austerity, has seen tax receipts plummet with government cuts: its ability to pay back debts is reduced, not enhanced by austerity.

Austerity proponents speak as if "business confidence" will be restored by cuts, and prosperity and jobs will magically return. Why? If everyone, except for banksters and one-percenters, have less money, who's going to buy what businesses sell? The wealthy are too few to create enough demand, so there's no reason for businesses to hire more workers, or produce more goods, if austerity means everyone--except the wealthy--will buy less than they did before. So where are more jobs to come from?

The Roman Empire was in a centuries long depression before it collapsed; its gold standard prevented expansion of the money supply; further, when Senators hoarded gold, money contracted, deepening the depression. Today, the Federal Reserve can expand the money supply, as can the Federal government. When demand is lacking, Government should build demand, not cut it. Only during a full recovery, should long-term budget deficits be cut, by tax and health care reform and withdrawal from an empire the US can no longer afford.

What's Wrong with GOP's Hensarling?

Texas Congressman (R) Jeb Hensarling proclaimed: "one of the biggest impediments to job creation today…is a lack of confidence in the future." He blamed this on "an administration where regulators have gone wild…threatening the largest single tax increase in America’s history and…[it] doesn’t take seriously the debt that is threatening our job creators.” [NYT 6/4/11]

What's wrong with this picture? Regulators have gone wild? Polluters went wild under Bush, speculators went wild; banks went wild, causing the recession. The "tax increase" Hensarling mentions, is the expiration of Bush's unfunded top-rate tax cuts. Tax rates for millionaires are lower now than at any time since 1929 and income inequality is higher.

Who are "job creators?" People who put up the money? Neither large corporations nor entrepreneurs are hiring. This is because employers do not "create" jobs. In order for hiring to happen, there has to be demand (or its potential) for goods or services in the economy (demand is not created by the employer), and there have to be people with the requisite skills to fill the jobs needed (provided by good schools). Entrepreneurs take advantage of many things they don't create: people, skills, demand, a legal system, and basic security.

Imbedded in that legal system are regulations, which establish a predictable marketplace. They also force businesses to compensate for damages to society. Polluters, for example, either pay the costs their pollution caused to society, or society has to pay it instead: in poorer health, a major cost. Why should a polluter profit from the lung cancer he causes in a hundred victims downwind?

As for debt: the greatest part of the debt Republicans like Hensarling rail about was caused by: two Bush tax-cuts, two unfunded wars and an unfunded mandate added to Medicare (Part D) by Bush and his Republican Congress. Then, to the debt was added the Great Recession caused by the lack of regulation which culminated with Bush, but had been building since Carter.

In recessions, governments take in less (in revenue) but have to spend more (for things like unemployment payments and Food Stamps), unless they're going to revert to a Dickensian age when people starved in the streets. Our experience in the Depression demonstrated that government programs (contrary to conservative dogma) created jobs, value and demand, and started the US climb out of the Depression--not completed until the massive deficit spending necessary to wage WWII.

Cutting spending does not create jobs, as evidenced by the rise in unemployed state and federal workers here, and renewed recession in budget-cutting UK. But it does increase inequality, and therefore the power of the extremely wealthy, our equivalent of the Senators of Fifth Century Rome.

Those Senators did much the same thing, weakening Rome, laying the stage for its fall, in 476.