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Sun Feb 3, 2013, 10:51 AM

Our Economy Still Faces A Cliff: European-Style Austerity–Learn The Facts



FULL BLOG POST WITH CITATIONS HERE.

The U.S. Economy shrank for the first time since 2009. There are many technical reasons beyond the scope of this post why the 0.1% drop is not as bad as it may initially seem. That said, this could be a mini-preview of the upcoming cliff. Sequestration, the severe and draconian cuts to both social programs and defense would make the United States, Europe on steroids as our downturn could trigger cataclysmic world financial events only surpassed by that which was inflicted by the doings of the titans of finance, during our most recent financial crisis in 2008. If massive cuts to education, public safety, and high-tech research that occurs automatically under the sequester go into effect then the real cliff is a certainty.

After already forcing trillions in cuts, causing layoffs, and strangling our economic growth, Republicans in Congress want to force European-style austerity on America -- inviting another recession. Cutting investments in our home front takes work away from companies that do business with our government and money out of the pockets of regular people who keep our stores thriving and hiring. We should cut waste, not jobs. Cut what we don't need like corporate tax loopholes, Pentagon pork, and Big Oil subsidies -- instead of dragging down our economy by cutting the things we do need.

Given that money borrowed under current rates are minimal, now is the time to start massive infrastructure rebuilding which will restart our economy, increase the tax base, and move the country towards the future. America use to be the bastion of modernity. America was the place where its vast technology benefitted the middle class. Why then are foreign cities like Shanghai where one goes to see technological prowess in action?

It is time that America gets a peace dividend. Even disparate defense think tanks, some conservative thinkers, and some Republicans in Congress reached common ground on defense cuts. The process of reducing the military budget needs to happen in a responsible way that supports affected families and communities. There's no shortage of valuable work that our country needs done -- from repairing crumbling roads, bridges, and schools, to spurring high-tech work like designing and building a smart grid and renewable energy technology. As such, investments in transitioning the workforce to a domestic modal is essential.

Instead of reshaping the Pentagon to fight 21st century threats, Republicans in Congress are insistent on protecting million dollar CEO salaries and millionaire tax loopholes. At the same time they are pushing for draconian cuts in our home front by laying-off more Americans dollar-for-dollar than on Pentagon projects.

The U.S. economy shrunk slightly in the fourth quarter of last year, contracting by 0.1% instead of growing by 1% as analysts expected. It represents the first economic contraction since 2009. Republicans in Congress got us here by pushing for massive spending cuts that threw tens of thousands of Americans out of work, repeatedly threatening default, and strangling job creation efforts ever since President Obama took office. Pentagon spending ranks dead last as a way to create jobs compared to investing the same amount in health care, clean energy, or education. Yet they seem to show more concern for the defense sector than sectors that materially affect most Americans.

During the last debt ceiling hostage taking, congress passed $1.7 trillion in cuts in one bill alone -- about $2.50 in spending cuts for every $1 in new tax revenue. Most of this was cuts to our home front investments like our schools, public safety, disaster preparedness, and scientific research.

Most of these funding cuts come from our home front programs. These include essentially all federal efforts to keep our air, water, food, prescription drugs, consumer products, workplaces, and borders safe. It also includes funding for medical and scientific research, veterans’ health care, nutrition and child care assistance to low-income families, the Smithsonian, and NASA.

Due to those funding cuts, and not counting the new funding cuts that begin in March, home front funding will drop to historic lows, almost 15% lower than its lowest point in the past 50 years. If the automatic spending cuts under sequestration go through in March, we will be cutting $4 in spending for every $1 in revenue. This means 80% of the total money will be paid for by middle-class and low-income families instead of the wealthiest Americans or big corporations.

With all the loopholes and special tax breaks afforded the wealthy and corporations in our tax code, finding the money to avoid the austerity cliff is obvious and easy to find. We must get $1 trillion in new revenue over 10 years by closing special loopholes and tax breaks.

For those who believe that the wealthy is paying their fair share, that they do not have enough income & wealth to close the gap, and that the middle class and poor must absorb a dose of austerity, it is essential that the truth be understood. It is a mathematical impossibility that in a country where 20% of Americans own almost 85% of all the net worth in the country, and where almost 10% of Americans own 90% of all financial wealth that somehow it isn’t the resource that must be tapped for solving the entire country’s deficit.

It is time for the truth. It is time to stop the pilfer by a sect of the wealthy. It is time to rebalance the countries income/wealth paradigm. It is time for the middle class to assert itself.
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