08/06/11: Worthington Daily Globe: Middle class will bear brunt of debt-ceiling deal, by Cynthia Moothart
Middle class will bear brunt of debt-ceiling deal
By Cynthia Moothart
Three months ago, an article on Republican actions in the debt-ceiling fight carried the headline: "America Held Hostage." In the deal struck this week to avert financial catastrophe, middle-class workers now will pay the ransom.
A great deal of bad faith undergirded this agreement, as Republicans skewed facts to make their case before refusing to negotiate altogether. In creating confusion and chaos, they left President Obama little choice but to craft the best worst deal he could.
As former Labor Secretary Robert Reich summed: "Anyone who characterizes the deal ... as a victory for the American people over partisanship understands neither economics nor politics."
By cutting middle-class spending without raising taxes on the wealthy, economists agree that it will further damage a weak economy and worsen America's long-term deficit.
Cutbacks over the last two years already have eliminated 500,000 public-sector jobs, while a decade of expanded tax breaks failed to create any spike in hiring. Worse yet, 75 percent of $2 trillion in corporate profits gained since 2009 resulted from cutting jobs.
Comparing the impact of today's recessionary spending vs. tax cuts, Moody's Analytics found that food stamps increase economic activity by $1.73 for every dollar spent, unemployment insurance by $1.62. Tax cuts to the already wealthy, by contrast, yield a net loss.
It's basic math: Dollar for dollar, tax cuts are a bad deal when they come at the expense of public investment.
Asked what remains of the economy now to deal with unemployment and slow growth, the economics editor of the Economist magazine replied: "Not much." As the world's wealthiest nation, she noted that the U.S. has resources to put its fiscal house in order, "it just lacks the political will to do it."
In 1945, with the nation at war, federal spending surpassed 47 percent of the GDP, nearly double what it is today, and the ratio of debt to total economic output reached 120 percent. America nevertheless invested in such things as the GI Bill and jobs creation, forging an economic expansion that built the middle class.
Since the dawn of small government in the 1980s, however, that broad wealth consolidated in shrinking numbers of hands. A recent Census report shows that median household worth fell dramatically over the five-year period ending in 2009. Today, just 400 individuals hold wealth equaling 150 million Americans, or nearly half the U.S. population.
Sickened by Republicans' slash-and-burn policies to further benefit the wealthy, polls show that a majority of Americans are looking to the elections in 2012 for relief.
Those votes won't simply be a repudiation of where we are; they will be a referendum on what we are: the democracy our Founding Fathers imagined or a plutocracy benefiting only the economic elite.
www.dglobe.com/event/article/id/50861/