The media is going sequester 24-7. Anyone who hasn’t been paying attention to the across-the-board spending cuts about to hit this Friday is about to have little choice. The brouhaha about the austerity bomb is drowning out any attention to what is actually going on in the economy — which is supposedly the point of the whole debate.
The stark reality is the economy is still in trouble and Americans are still hurting. The economy contracted last quarter, even before Americans got hit with the end of the payroll tax holiday, which will take $1,000 out of the typical family’s annual paycheck. The Congressional Budget Office projects that growth will inch along at about 1.5 percent this year. That translates into continued mass unemployment — with more than 20 million people in need of full-time work — and falling wages. The richest 1 percent captured an unimaginable 121 percent of all income growth in 2009 and 2010, coming out of the Great Recession. They pocketed all of the growth in income, while 99 percent of Americans actually lost ground. That trend is likely to get worse rather than better.
Federal Reserve Governor Janet L. Yellen described the tragic human costs of widespread, long-term unemployment in an important speech this month. Families lose their homes; divorce and depression rise; children are scarred; skills are lost. A young generation is leaving school to sit on the couch.
Yet most of Washington — from the newly reelected Democratic president to the self-described insurgent Tea Party Republicans — is ignoring this reality to focus on cutting deficits.
The Republican Congress seems intent on letting the “sequester” take place — the idiotic across the board cuts that were explicitly designed to be anathema to both parties. Senate Democrats call not for repealing these cuts, but for “paying for” delaying them for a few more months.
Why this fixation? Deficits aren’t careering out of control. In fact, as the Congressional Budget Office reports, in relation to the economy, the deficit has fallen faster over the past three years than at any time since the demobilization after World War II. Calls for cutting Medicare benefits ignore the reality that the slowing rise in Medicare costs has already cut about $500 billion from its projected costs over 10 years compared to estimates made two years ago.
In fact, the too-rapid and premature decline in deficits in a weak economy is hindering any recovery, as Yellen noted.