Politics & Law

A question of timing: What America can learn from the revolt in Europe

Robert Reich

Who’s an economy for? Voters in France and Greece have made it clear it’s not for the bond traders.

Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts — but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.”

Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece — as well as his own poll numbers. Britain’s conservatives have been taking a beating.

In truth, the choice isn’t simply between budget-cutting austerity, on the one hand, and growth and jobs on the other.

It’s really a question of timing. And it’s the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.

That’s because public spending is a critical component of total demand. If demand is already lagging, spending cuts further slow the economy — and thereby increase the size of the public debt relative to the size of the overall economy.

You end up with the worst of both worlds – a growing ratio of debt to the gross domestic product, coupled with high unemployment and a public that’s furious about losing safety nets when they’re most needed.

The proper sequence is for government to keep spending until jobs and growth are restored, and only then to take out the budget axe.

If Hollande’s new government pushes Angela Merkel in this direction, he’ll end up saving the euro and, ironically, the jobs of many conservative leaders throughout Europe – including Merkel and Cameron.

But he also has an important audience in the United States, where Republicans are trying to sell a toxic blend of trickle-down supply-side economics (tax cuts on the rich and on corporations) and austerity for everyone else (government spending cuts). That’s exactly the opposite of what’s needed now.

Yes, America has a long-term budget deficit that’s scary. So does Europe. But the first priority in America and in Europe must be growth and jobs. That means rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat.

President Obama and the Democrats should set a clear trigger — say, 6 percent unemployment and two quarters of growth greater than 3 percent — before whacking the budget deficit.

And they should set that trigger now, during the election, so the public can give them a mandate on Election Day to delay the “sequestration” cuts (now scheduled to begin next year) until that trigger is met.

Cross-posted from Robert Reich’s blog.

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Comments to "A question of timing: What America can learn from the revolt in Europe":
    • robert conner

      I often find humor in a liberals point of view. I read both Reichs blog and Anthony St. Johns comments.
      Any “global warming” argument is laced with a political agenda. History has proven the temperature on earth has risen and fallen many times over our 5 billion year span. Any objective notion that man has any real relevence on the health of earth is very questionable, at best.
      If you want jobs in America, open drilling and exploration on public lands. We import $800-900 billion of oil every year. Why not use our own? The environment won’t change one single bit by drilling at home as opposed to in the middle east. If oil is going to be used, use our own. And until there is an economically viable alternative, oil will be used. Globally.
      If oil is drilled here, 100,000s of jobs come with it.. Jobs from drilling, from housing needed, to food suppliers, to cleaning people, dry cleaners,…you name..the support jobs that go with any improvement. Not to mention tax revenues.
      So, if Mr. Reich feels jobs are most important, why not show Obama where the jobs are?

      [Report abuse]

    • Avi Rosenzweig

      Astroturf!

      Note that the marketing agency that is posting comments on Reich’s blog in order to get more eyeball bang for their mega-corporate buck (got to admire their thrift!) is not required to disclose who is actually paying for (or as our Supreme Court would say, ‘free-speech’ing) these political commercials.

      The record of GOP failure is clear, and voting for Repooblicans will mainly insure more Wall Streets, and Katrinas and Global Wars for oil in our country’s future. The American people will not fall back into the days of Dick Cheney and Don Rumsfeld no matter how many hack bloggers the shady super-PACs hire to spread their shortsighted, compassion-free talking points.

      [Report abuse]

    • Anthony St. John '63

      For the 2012 election, the “Dems” in the White House and Congress must dedicate themselves to ending poverty, enabling Peace on Earth and saving our environment.

      Our universities must focus on producing graduates who can solve multidisciplinary social, political, economic, environmental and scientific problems, and provide leadership to implement solutions with the sense of urgency required to guarantee acceptable quality of life for all future generations.

      [Report abuse]

    • Anthony St. John '63

      Prof. Reich, FIRST we must learn from our own failures:

      1. We must come up with solutions to prevent economic instability and inequality that have caused the worst problems we have today, and

      2. We must produce technological innovations to prevent unacceptable consequences of global warming from destroying quality of life for future generations.

      To accomplish these imperatives, UC must immediately focus on teaching multidisciplinary courses to:

      1. Create solutions to perpetuate an acceptable quality of life, and

      2. Produce leaders to fast-track implementation of solutions.

      [Report abuse]

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