The ayatollahs of austerity, led by Arizona's fanatic laissez-faire congressman Jeff Flake, seem to be prevailing in their efforts to bring America's economy down even further. The prevailing "wisdom" is that of Herbert Hoover during the Great Depression: fight a severe economic downturn by imposing even more pain on American citizens. And keep those who are in pain worse off than they would otherwise be.
Jeff Flake has voted against extending unemployment benefits throughout his long tenure in Congress, during which the U.S. has lost nearly a million jobs. Like the radical Senate candidate in Nevada, Jeff Flake believes the jobless have no one but themselves to blame. He's against any unemployment benefits because he believes people collecting them are not desperate, just lazy.
Maybe it's easy to say when fat cats have bankrolled your entire career, throwing millions at you every quarter so you can avoid a serious campaign for re-election while you do their bidding and go against the ordinary people who you're supposed to represent.
Jeff Flake is more for Exxon Mobil than for Mesa, more for Goldman Sachs than for Gilbert, more for J.P. Morgan Chase than for Chandler, more for Qwest than for Queen Creek, more for AIG than for Apache Junction.
We're in a real danger of a double-dip recession, as last Friday's unemployment numbers show, and Jeff Flake neither wants to help those Americans who are under water or keep the rest of America from drowning in a second Great Depression. By saying no to all short-term stimulus, he makes the long-term debt and deficit worse and makes regular people's lives that much worse - just when states like Arizona are cutting their budgets, laying off police officers and teachers, and already causing a severe fiscal contraction.
But like the socialists and communists who denied economic reality in thrall to a theory, an intellectual fanatic like Jeff Flake doesn't give a shit about reality or real people.
Meanwhile, yesterday the economist Robert H. Frank proposed some innovative ways to promote economic recovery while bringing down the deficit. We highlight them (boldface ours) here:
There is no conflict — absolutely none — between our twin goals of putting the economy back on its feet and reducing long-term deficits. On the contrary, government could take many steps that would serve both goals simultaneously.
For example, it could create a program to restructure consumer debt. Although rates on 10-year Treasury bonds are only about 3 percent, many consumers still carry tens of thousands of dollars of credit card debt at 20 percent or more. This burden has been a continuing drag on spending. The federal government could reduce it by borrowing at 3 percent and lending to consumers at 8 percent under a one-time debt-restructuring plan.
With their debt service payments cut by more than half, consumers could increase spending immediately. And the five-percentage-point spread on money lent under the program would help cover its administrative costs, and maybe even relieve short-run government budget pressure.
(Banks might complain, but because the money owed to them would be repaid in full, and because they insist that their high interest rates barely cover their costs, such complaints would ring hollow.)
Another useful measure would be a carbon tax — or its approximate equivalent, a cap-and-trade system — scheduled for a gradual phase-in after the economy has again reached full employment. This would stimulate an immediate, huge jump in private investment without the government having to spend a penny.
Why? Investment is currently depressed because companies can already produce much more than people want to buy. But once a carbon tax was announced, the design of nearly every existing machine or structure that uses or produces energy would be rendered suddenly obsolete. Motor vehicle engines, electric power plants, refrigerators, air-conditioners, furnaces — all would have to be redesigned for greater efficiency.
The resulting flood of research and investment would enhance our ability to cope with future energy shortages and would serve another crucial purpose. Taxing carbon could eliminate the catastrophic risk of vastly rising global temperatures by the end of this century; it would be a prudent act, quite apart from its utility as an economic stimulus.
The tax would generate no revenue until its phase-in, so it wouldn’t reduce the current deficit. But deficits are a long-run problem, and its enactment alone would increase creditors’ confidence that we are committed to solving it.
Another productive measure would be to increase public investment in infrastructure. When road repairs are deferred for just two to three years, total maintenance expenses can more than double — even if we ignore the cost of accidents and vehicle damage caused by potholes. Spending an extra dollar now to save two dollars three years from now is an investment with an annual rate of return of more than 18 percent.
Making that investment with money borrowed at 3 percent would not only put people to work immediately, but would also help balance government budgets. And after decades of infrastructure neglect, there are many other public investment opportunities that promise returns even higher than 18 percent.
Here’s a final example, which I’ve long advocated: The government could enact a progressive surtax on extremely high levels of consumption, with a phase-in beginning once the economy recovers. This would reduce long-run deficits while stimulating extra spending immediately. And, like the other examples, it would be a step worth taking even apart from those effects.
Because incomes of the wealthy have been growing sharply in recent decades, luxury consumption has also been rising rapidly. But beyond a certain point, additional consumption raises the bar that defines what counts as adequate, without any increase in objective measures of well-being. And because savings would be untouched by this surtax, it would help steer resources away from keep-up-with-the-Joneses spending races and into productive investment. That would increase productivity growth.
Under a consumption surtax, people would report their incomes and their annual savings to the I.R.S., as many now do for tax-exempt retirement accounts. A household’s annual consumption would be calculated as the difference between its income and savings. Congress might apply the surtax only to annual consumption beyond $500,000.
THE resulting revenue would reduce deficits after the phase-in. In the meantime, just the knowledge that the surtax was on the way would stimulate a temporary surge in consumption, as wealthy families rushed to build additions to their mansions and make other purchases before the tax took effect.
In short, the government could take many steps that immediately bolster spending and employment, while also addressing deficit worries. But that’s not where we appear to be headed, as big spending cuts are being proposed in the name of fiscal responsibility.
But as almost 10 percent of the labor force remains unemployed, such cuts would instead be the height of fiscal irresponsibility.
Don't let irresponsible fanatics like Jeff Flake get away with murdering American families' dreams.
Every effort to dig the nation out of the unemployment abyss "is being stymied by excuses about the deficit," said Richard L. Trumka, president of the AFL-CIO. "It is a national disgrace that members of Congress are heading home to celebrating our nation's birthday after having voted repeatedly not to create jobs or to extend unemployment aid."
You can either re-elect a fanatic career politician like Jeff Flake who will do nothing but sit on his gym-toned ass while American families' lives get worse or vote for a change.
