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Gridlock, unhealthy for our economy


Fri, Aug 31st, 2012
Posted in All Commentary

Recent reports from the non-partisan Congressional Budget Office (CBO) and the Pew Research Center are evidence that the era of gridlock in Congress has not been healthy for American personal pocketbooks or government finances.

When the United States entered World War II, Winston Churchill declared, “Americans can always be counted on to do the right thing. . .after they have exhausted all other possibilities.” Apply his thinking to our Congress and we have a very eloquent way of saying, our lawmakers “kick the can down the road” or avoid the inevitable until they are cornered and forced into making the hard decisions. Delay has only magnified the economic problems.

The failure of our lawmakers to develop a long-term balanced plan that will both increase revenue and trim government programs including Medicare and defense is a threat to our economic future well being. Many believe a long-term plan that allows for measured changes so as to not damage the current slow economic recovery is a necessity.

CBO

On August 22 the CBO in its annual summer update maintained that if Congress does nothing and lets the scheduled tax policies, including the end of the Bush tax cuts and the payroll tax holiday, and spending policies, scheduled reductions in domestic and defense spending, take effect at the beginning of 2013, tax revenue will go up and spending will go down and likely drive the country into recession. Resulting job loses could cause unemployment to rise over nine percent. This huge shift, anything but measured plan, would be a significant shock to the economy.

The deal for the automatic spending cuts was signed into law a year ago, and there still is no one at the switch to keep the slow motion train from going over the cliff. There is a consensus among most lawmakers that they need to do something, but as usual, the polarization of Congress is getting in the way.

The projected deficit for 2013 would be about $500 billion less than the $1.1 trillion projected for 2012 if Congress does nothing. If the above policies were continued for 10 years, the CBO estimates the country’s debt held by the public would be reduced from 73 percent of GDP in 2012 to 58 percent of GDP in 2022. However, if Congress moves to continue current policy, then deficits will be almost 90 percent of GDP by 2022. Current policy is not a viable option, nor is doing nothing, thereby letting the so-called fiscal cliff happen.

Both parties have participated in the gridlock or the inaction that has put this slowly recovering economy at risk. With the upcoming elections lawmakers lack the courage to make the tough decisions. It is reasonable to believe that with the country nearly as polarized as Congress neither party is going to get a “mandate.” Not much will be different after the elections except the next election will be two years off. If Congress would act before the election, the electorate would more truly know where serving congressional people stand on the issues. Bipartisan commissions have come up with reasonable and studied plans to deal with the ballooning deficits and the country’s growing debt, taking into account the long-term needs and future demands of entitlement programs, due to projected growth in numbers of elderly people in the coming years.

Pew Research Center

For the first time since World War II, during the decade from 2000 to 2010, the middle class is less prosperous than the previous decade. Pew refers to these years as “the lost decade.” It found a shrinking middle class with declining income and wealth. Twenty-five hundred and eight adults were surveyed, of which 1,287 identified themselves as middle class.

Rich Morin, senior editor for the Pew Research Center, maintained that political scientists believe the key to a functioning democracy is a functioning middle class.

Upper income households were ‘more’ prosperous in the ten-year period with 46 percent of total household income in 2010 compared to 29 percent of the total household income enjoyed by this group in 1971. The middle class percent of total household income fell from 62 percent in 1971 to 45 percent in 2010.

Middle class net worth has dropped 28 percent over the last decade partly due to lost value in their homes. Middle class income has fell about $3,500 over the last decade.

People put most of the blame for the lost decade on Congress, 62 percent. They also blame financial institutions, larger corporations, and foreign competition to a lesser extent. More people put blame on the Bush administration (44 percent), than blame the Obama administration (34 percent). Only about eight percent place some of the blame on themselves.

I agree Congress deserves most of the blame due to a general reluctance to work together to solve fiscal problems facing the country. The delay only puts more strains on the economy. Regardless of their distinctly different underlying political philosophies, the only reasonable solution is a blending of ideas and vision toward goals of fiscal growth while protecting the vulnerable. The country’s problems have grown in part due to the inability of members of Congress to put a balanced long-range fiscal plan into place. This will avoid across the board indiscriminate spending cuts, will deal with the large deficits, will reform the ridiculously complicated tax code, which is riddled with loopholes, and will make necessary reforms to Medicare and other entitlement programs to preserve them for years to come. In addition, Congress deserves blame for their general inability to define the problems truthfully to the American people. Congress has only a 12 percent approval rating; well deserved.

Doing Our Part

Both of these reports illustrate what needs to be addressed by Congress. Congress has exhausted all other possibilities, now it is time for them to do the right thing for the country. They have continued to pass legislation that doesn’t attempt to put any realistic fix into place, but only to keep the government limping along until the next deadline approaches. This is not sustainable and has a negative impact on the economy.

It is our job to become educated on the issues and the candidates. Many political ads we are being subjected to provide misinformation and sometimes outright untruths. Allow yourself to get your information from a variety of media sources. Most of us tend to seek out information sources that conform to our point of view, but this limits our understanding of the issues. We need to do our homework to learn about the candidates and exercise our right to vote or we can’t complain about the lawmakers we get.

Let’s hope Churchill is correct, that Americans and Congress can be counted on to do the right thing. To this point, surely, all other possibilities have been exhausted.

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