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Robert Reich | How to Avoid the Austerity Trap But Still Deal With the Budget Deficit

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- 2156 days ago -
"The way to avoid this austerity trap is to get growth and jobs back first, and only then tackle budget deficits. "

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Kit B (276)
Tuesday May 29, 2012, 11:50 am

An excerpt from the article:

If recent history is any guide, a deal will be struck at the last moment during a lame-duck Congress, some time in late December. And it will only be to remove the January 1 trigger. Keep everything as it is, the Bush tax cuts as well as current spending, and kick the can down the road into 2013 and beyond.

Which means no plan for reducing the budget deficit.

I've got a better idea a different kind of trigger. Instead of a specific date, make it the rate of growth and employment we should reach before embarking on deficit reduction.

Say 3 percent growth and 5 percent unemployment. At that point the Bush tax cuts automatically expire, the wealthy pay a higher rate, and $2 trillion in spending cuts begin.

By Robert Reich for Nation of Change

The above is but an excerpt and out of context so reading the full (short)article is needed for understanding Mr Reich's ideas.

Lucy Bell (9)
Tuesday May 29, 2012, 11:52 am
Hear hear

Kit B (276)
Tuesday May 29, 2012, 9:19 pm

In had to scroll down till I got to the crux of what I believe is the center point of the problems - The FED. Thanks for link Charles. I happen to agree that Riech is a bit fanciful on this one, but thought it worth a discussion.

Lois Jordan (63)
Wednesday May 30, 2012, 4:39 pm
I'm with Charles....those Bush tax cuts were supposed to end long ago. We have flipped the Reagan "trickle-down" economy upside down---we live in a "TRICKLE-UP" economy, with us in the 99% losing more daily to the wealthiest. When the Simpson-Bowles Commission was formed, I complained loudly & often--there should be no debate on the debt, it should be treated similarly to the way FDR treated it....back burner. The Obama stimulus wasn't enough; and although that's true, the teabaggers still screamed bloody murder against it. What we need is another stimulus, and protection of our safety net. This IS a class war, and we have to educate those who are unaware.

Kerrie G (116)
Thursday May 31, 2012, 5:45 am
Noted, thanks.

Sko K. (0)
Thursday May 31, 2012, 8:19 am
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Myron S (70)
Monday June 4, 2012, 10:01 pm
I find nothing fanciful about Reich's prescription. Or the similar one of Paul Krugman. Anemic demand is the reason we remain trapped in the slowest recovery in post-Depression history. The deficit boogie man is a politically motivated distraction. Austerity will have the same negative effect here it is having in Europe. This actually is pretty basic modern economics. Obama probably understands this, but he has been too concerned about political imagery and not offending potential deep pockets from the git-go to exercise real leadership.
While reforming the Fed is a laudable long-term goal, as part of an overall program of system reform, in no way is the Fed the problem with the economy now. Bernanke has done more to stave off a second round of recession than Obama or anyone else. At this moment, focusing on the Fed is just another distraction from the real job of (paraphrasing JFK) getting our economy moving again and, thereby, (quoting him) "get America moving again." With the GOP playing the role of Merkel and Obama of Sarkozy while their corporate master write the script, however, the one thing that is fanciful is any hope that solid economists like Reich and Krugman will be heeded.
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