What’s coming in 2011? We asked thought leaders to share their perspectives on the biggest challenges for the year ahead, along with the changes they’d like to see and the hopes they cherish. Marshall Auerback explains how misguided attempts to reduce the deficit kill jobs, squeeze the working and middle classes, and inflate crude oil prices. And a corrupt political system doesn’t help.
The beginning of the year always seems a good time to lay out some broader themes which could develop throughout the year, good and bad, so here goes:
The good news is that the US budget deficit still looks to be large enough to support modest top line growth and sustain and stabilize incomes, even if it’s not large enough to bring the jobs we need. As I’ve argued many times in the past, higher government deficits facilitate private sector deleveraging and continuously add to incomes and savings. It is no coincidence that the financial burdens of households and corporations have continued to fall (and savings rates risen) as government deficits have increased.
Unfortunately, the new Congress appears bent on misguided deficit reduction. By next week, the House of Representatives will have a deficit hysteric majority, with many pledged to a balanced budget amendment. And the world seems to be leaning towards fiscal tightening pretty much everywhere. The unemployment benefits program has been extended, but benefits still expire after 99 weeks, and less in many states. Net state spending continues to decline as state and local governments continue to reduce their deficits.
http://www.newdeal20.org/2011/01/04/drinking-austerity-kool-aid-in-2011-31310/
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