Next 4 Years—Back to the Future

Financial FAQs

President Obama’s victory means it’s Back to the Future for economic as well as social policies. It means he now has the mandate to implement what the electorate chose him for—a functioning government to not only fix disasters such as Hurricane Sandy, but the economy; to lead the United States of America into the future rather than backward with Republican economic policies of the 1920s, as Obama said in the third debate.

Yes, that does mean government creates jobs, contrary to the Bain Capital ethos—whether in Detroit, or with clean energy investments, infrastructure building, better regulations that prevent economic disasters, and lower cost student loans that enable a better educated workforce.

That is, if he doesn’t give in to Boehner’s House Republicans who aren’t budging on returning tax rates to the Clinton era, when 23 million jobs were created and there was greater prosperity for all.

Paul Krugman has called it economic blackmail. “Because Republicans are trying, for the third time since he took office, to use economic blackmail to achieve a goal they lack the votes to achieve through the normal legislative process. In particular, they want to extend the Bush tax cuts for the wealthy… So they are, in effect, threatening to tank the economy unless their demands are met.”

The fiscal cliff is not the real problem, or large budget deficits at a time when the economy still needs a boost. It is not really a cliff, according to most analysts. The Center for Budget and Policy Priorities is one of many that say it is more of a slope, in that the effects of letting the Bush tax cuts lapse and the sequester agreement to cut government spending only begin to take effect in 2013.

“In fact, the slope would likely be relatively modest at first (and then much steeper if 2013 unfolds without a fiscal resolution). This means that if there is no agreement by January 1, policymakers will still have some (although limited) time to take steps to avoid the serious adverse economic consequences that the Congressional Budget Office (CBO) outlines in its recent analysis of what will happen if the expiring tax cuts and new spending cuts take effect on a permanent basis.”

Exit polls showed voters tended to blame Bush for the Great Recession, rather than Obama, and so have given President Obama the opportunity to lead us back to fiscal sanity. It turns out Republicans tried to label Democrats as the tax and spend party, but voters decided Republicans have been the real tax-cut and spend party; which is true. Presidents Reagan and GW Bush were responsible for both the largest tax cuts and largest budget deficits since WWII, in their decision not to follow the pay-as-you-go budget rules that said tax cuts had to be matched by spending cuts.

It really boils down to how much to tax which U.S. taxpayers. Conservatives have called for lower taxes in the name of greater freedom from government controls. But Obama’s victory is a victory for the right to choose—the freedom to choose union representation and negotiate wages via collective bargaining, or women’s control of their health, family planning, or even a cooler climate.

The future belongs to those who have recognized that the richest have been helping themselves, rather than the country. It belongs to those who see that government is for the common good, rather than the few. This is the direction, however halting, that government has been marching ever since the New Deal began to cure the flaws and real damage that unrestrained capitalism can cause—back to the future.

Harlan Green © 2012

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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