...Can we just put ideology aside for a moment and be clear about the facts? Consumer spending (70 percent of the economy) is flat or dropping because consumers are losing their jobs and wages, and don’t have the dough. And businesses aren’t hiring because they don’t have enough customers.
The only way out of this vicious cycle is for the government – the spender of last resort – to boost the economy. The regressives are all calling for the opposite.
But even without these hare-brained Republican plans, we’re heading in their direction anyway. Unless Republicans agree to a budget deal before the end of the year (don’t hold your breath), the temporary payroll tax cuts and extended unemployment benefits we have now will end.
The result will be the most stringent fiscal tightening of any large economy in the world.
Together with ongoing cuts at the state and local government level, the scale of this fiscal contraction would be almost unprecedented.
It will come at a time when 25 million are Americans looking for full-time work, median incomes are dropping, home foreclosures rising, and a record 37 percent of American families with young children are in poverty.
To call this economic lunacy is to understate the point.
And if you think 2011 is bad, you ain’t seen nothin’ yet.
Even if you’re a deficit hawk this is nuts. Instead of reducing the ratio of debt to the size of the overall economy, this strategy increases the ratio because it causes the economy to shrink.
Call it the austerity death trap.
Under these circumstances, the harder a country works to cut its debt, the worse the ratio becomes — because the economy shrinks even faster...
A.k.a. a vicious cycle, the negative feedback amplifying itself at each step, and the conservative ideologues in either party screeching louder to do more at each step down the death spiral of the economy- and society- into the new feudalism.