Web Only / Features » November 19, 2012
Once Upon a Fiscal Cliff
The deficit hawks appear to love fairy tales; here’s one based in reality
Once upon a time, America’s political leaders understood that a fair, prosperous, life-giving society was one where corporate interests were trumped by the need for decent jobs, collective bargaining and community well-being. Every four years, political leaders looked at their reflections and asked, “Mirror, mirror, on the wall, will the deficit crush us all?” The answer was always, “No way, dude. There are real economic problems to deal with. Federal spending promotes human well-being in all its dimensions.”
There followed decades of progress toward greater income equality, increased protections for consumers and the environment, and more respect for the civil and economic rights of women, people of color and the differently abled. The very richest in America were dismayed. Then, as if guided by an invisible hand, they stumbled upon a gaggle of economists who, for a buck, concocted fashionable fictions promoting the elite’s self interest.
Oh how the rich rejoiced. First, waves of massive tax cuts brought them huge increases in their after-tax income. With that windfall, they bought lobbyists, politicians, think tanks and entire public-school curricula. After the passage of some years, political leaders asked, “Mirror, mirror, on the wall, will the deficit crush us all?” And the answer was, “Not really, but it’s a great sound bite and you can get folks to believe it. But honestly, solving real economic problems requires deficit spending. So create deficits by cutting taxes and spending more on the military.” The elite nodded to themselves and smiled. They bought fleets of jets and flotillas of yachts. “Nothing,” they thought, “can stop us now!”
So decades passed. Pundits and politicians and all the serious people were agreed, “Consumption is freedom.” “Taxes are tyranny.” An endless barrage of propaganda celebrating buy now, pay later weakened the citizenry’s immunity to infectious ideologies, and paved the way for an especially virulent strain of laissez-faire fever. Political leaders, their pockets stuffed with disease-tainted money, had ears for only the evil sorcerer Peterson-Simpson-Bowles. His endless refrain, “deficits are squashing us, the national debt is bad,” drowned out practically every other economic concern. Then, one dreadful day, the political leaders asked, “Mirror, mirror, on the wall, will the deficit crush us all?” And the mirror answered, “Yes, it will. To hell with the agenda for decent jobs at decent wages, improving public education, fighting climate change or rebuilding the nation’s crumbling infrastructure. The budget is all we should care about. Because we have deficits (no matter that they’re not even very high by historical standards), austerity is the way to go. Let’s cut every government program we possibly can.”
Oh how the political leaders moaned and beat their breasts. “This will hurt us more than it hurts you,” they cried to the people. “It’s for your own good,” they messaged. Media soothsayers doing the bidding of the powerful terrified the people with lurid tales of hyperinflation. And deficit hawks constructed a fiscal cliff so daunting that no politician would venture too near the edge. Or so they hoped.
“Wait,” cried progressive economists. “Use your eyes. Do you see any inflation? For the past four years we’ve had the lowest inflation recorded in decades. You know why? Because we—our economy—isn’t producing nearly as much as we could. The 20 million unemployed and underemployed could easily go back to work. There are plenty of cash registers they could ring, buildings they could fix, classes they could teach, computers they could program, kids they could care for, and patients they could tend. There’s lumber, there’s steel, there’s energy. We’ve got machine parts, tools, computer chips and the know-how to use them. There aren’t any real shortages, no significant bottlenecks, so there’s no upward pressure on prices. That inflation story is pure hokum.”
They went on. “Apologists for the 1% are as full of it on interest rates as they are on inflation. All their bleating about how borrowing by the national government is more than the markets can stand? Get over it. The capital markets are clamoring for more, not less, U.S. government debt. We’re the safest investment in the world. And the Chinese? No worries there either. That economy is so dependent on us buying their stuff that they’re willing to lend us the money to do it.”
Labor leaders paused and scratched their heads. “You know that’s right. Wages aren’t rising, they’re falling. No sign of inflation in labor markets. We can’t think of any workers in America who would be hurt by a bit of inflation. Certainly some inflation would be better than continued mass unemployment.”
Community activists stopped in their tracks. “Hey man, they’ve got a point. We can’t do our work in America’s cities, towns and rural communities without federal support. Remind us of why we’re supposed to support austerity programs? Oh … we’re worried about the deficit causing inflation. It’ll cause interest rates to rise too. But there’s no evidence that either are happening, or are likely to happen in the near future.”
Teachers, firefighters, librarians, police officers, sanitation workers, nutrition advisors, public health workers, wheels-on-meals coordinators, respite caregivers and day-care providers looked up from their work for society’s well-being and smiled. “Hallelujah! We knew austerity was a bad idea, now we know why.”
The Peterson-Simpson-Bowles sorcerer wasn’t the least perturbed. Cackling and rubbing his hands, he urged the politicians toward the fiscal cliff. “This’ll stop ’em,” he chortled. “They won’t dare risk the hit to aggregate demand that would be caused by hundreds of billions of cuts to federal spending at the same time that taxes increase. Such cuts accompanied by tax increases would wipe out the pathetic recovery they’ve managed to kindle while costing tens of millions of jobs. They’re not fools—they understand Keynesian economics.”
Peterson-Simpson-Bowles dispatched a steward to guide politicians through the forest of deficit reductions to a small clearing at the edge of the fiscal cliff. Pausing to catch their breath, they looked up startled when a burst of raucous singing rang through the trees.
“Hi ho, hi ho, it’s off the cliff you’ll go,” sang seven little people.
“What?” shouted the steward, “who are you?”
“I’m Grumpy,” said the first little person. “All your propaganda to the contrary, I know how much all of us little people benefit from the programs paid for by the national debt. Why, we should’a pushed you off a cliff ages ago.”
“I’m Sneezy,” said the second little person. “I rely on Social Security disability because my lungs have been so damaged I can’t work in the mines anymore.”
“I’m Doc,” said the third little person. “If we just let the Bush tax cuts expire, with that new revenue we’ll be able to really improve access to affordable health care.”
“And I’m Dopey,” said the next. “Some of that $5 trillion can be used for rehabilitation programs to get non-violent drug offenders out of jail.”
Happy just laughed at the astonished look on the pols’ faces.
“And I’m Sleepy,” said the sixth. “Wages have fallen so much I have to work two jobs just to make ends meet. I’m exhausted.”
“And I’m Pushey,” said the last. And with that they joined hands and ran the politicians off the fiscal cliff.
Here’s how this story can have a happy ending. After the people run the politicians off the cliff and the tax cuts expire, our government must direct attention to the urgent economic problems facing the nation. Grant the states at least $500 billion in direct aid, enough to restore education, health, public safety and infrastructure spending to 2007 levels, before the economic crash—caused by the reckless behavior of financial elites, abetted by the laissez-faire passions of politicians and encouraged by the blindness of regulatory agencies–completely undermined state revenues. Let new appointments to the Supreme Court restore the rights of workers to collectively bargain, and a new, inclusive wave of worker activism lead to increased unionization.
And why stop there? Reduce the full-time work week from 40 hours to 30, double the minimum wage (restoring it to the purchasing power it had in 1970), enforce federal equal rights legislation and corporate regulations, shut down the hundreds of thousands of off-shore shell corporations that exist only to shelter ill-gotten lucre from lawfully owed U.S. taxes, enshrine the right to healthcare and pass a constitutional amendment overturning the idiotic decision to grant corporations free speech rights.
If we can ignore the doomsday prophets and push the politicians over the cliff, we might just live happily ever after.
Susan F. Feiner
Susan F. Feiner earned her PhD in economics at the University of Massachusetts, Amherst. An invited visiting professor at the University of Athens, Greece, the University of South Australia, and the University of Amsterdam, she is internationally recognized as one of the original contributors to the new field of feminist economics. Her book, with Professor Drucilla Barker, Liberating Economics: feminist perspectives on families, work and globalization was recognized as an “outstanding academic title.” She’s published widely in formal economics journals and is now focusing on economic journalism to promote social change. She writes for Women’s Enews, MS. Magazine, The Women’s Review of Books, On the Issues, as well as a monthly Insight column for the Maine Sunday Telegraph.