This past weekend French voters denied their incumbent president Nicolas Sarkozy reelection in a resounding rejection of austerity policies which have kept European economic recovery out of reach. In arrant disavowal of this message and mounting real world evidence to the contrary, Republicans in the U.S. continue their own pursuit of spending cuts policy.
Sacrifice and spend is the basis of the GOP strategy. Its most recent incarnation of this budget approach is embodied within the Ryan Budget which does reduce the deficit but sacrifices funding for numerous social and health programs while extending generous tax cuts and increases defense spending. As of this morning, the House of Representatives approved a bill which retains defense spending levels while cutting $18 billion from Medicaid and the President’s housing assistance program for struggling homeowner’s this year and $250 billion over the next decade. It also cuts funding from a regulatory agency that oversees controlled collapses of failing financial firms in an effort to avoid what was witnessed during the Great Recession.
While the concerns are warranted and efforts by the conservatives in Washington to reduce national debt is understandable, as the world has seen in Europe the timing is inappropriate. Debt reduction is a long-term goal while creating the conditions for recovery from a deep economic crisis involves short-term policies. The two are incompatible with one another. Given this, there are balanced approaches which can be implemented over time while maintaining the resources needed for recovery in the short-term. Two similar plans have originated in congressional committees over the past 3 years. All included sustainable spending cuts and responsible tax increases. However, each of the plans were thwarted by the No Tax pledge signed by the vast majority of congressional Republicans.
In principle, the newly elected French President, Francois Hollande, has declared his wish to take a similar balanced debt reduction, growth fostering strategy as those proposed in the US. Spending in the short-term needs to be targeted and geared towards investment. The retraction in this aspect is a significant reason why the continent sits in constant fear of a second downturn and why countries like Spain are experiencing a double-dip recession. The US’s stimulus stemmed the tide of job losses and the investment it was able to make helped create conditions for the private sector to begin hiring again. As was evident from the May 2012 job report April was the 26th straight month for private sector growth. As stimulus funding faded and budget cuts took effect the primary source of job loss was in the public sector, in government jobs. These losses negated many of the gains made in other sectors and illustrates how austerity diminishes the overall recovery.
For the Republican Party the question avails itself, will European public outcry and real world evidence running counter to their austerity policies result in a predictable dismissal of the outcomes as testament to the detriments of socialism? Or, with their own particularly low public approvals will they consider this a portent of things to come and acknowledge the need to break from party line principles to find a way to listen without pretense?
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