Obama’s Real Budget Plan (and Why It’s a Huge Gamble)

By Robert Reich

Here’s the part of interest to me:

Yet what are the chances of a booming recovery? The economy is now growing at an annualized rate of only 1.5 percent. That’s pitiful. It’s not nearly enough to bring down the rate of unemployment, or remove the danger of a double dip. Real wages continue to drop. Housing prices continue to drop. Food and gas prices are rising. Consumer confidence is still in the basement.

Fair enough, now on to the problem and the remedy:

By focusing the public’s attention on the budget deficit, the President is still playing on the Republican’s field. By advancing his own “twelve year plan” for reducing it – without talking about the economy’s underlying problem – he appears to validate their big lie that reducing the deficit is the key to future prosperity.

Promising rhetoric there- deficit reduction isn’t the answer!

The underlying problem isn’t the budget deficit.

Really getting my hopes up now!

It’s that so much income and wealth are going to the top that most Americans don’t have the purchasing power to sustain a strong recovery.

****sound of a balloon deflating****

Until steps are taken to alter this fundamental imbalance – for example, exempting the first $20K of income from payroll taxes while lifting the cap on income subject to payroll taxes, raising income and capital gains taxes on millionaires and using the revenues to expand the Earned Income Tax Credit up to incomes of $50,000, strengthening labor unions, and so on – a strong recovery may not be possible.

Message to Bob:

I suspect you understand taxes function to regulate aggregate demand, not to fund expenditures per se?

So please don’t blow smoke and instead just state that the tax cut part of your proposal is meant to add to aggregate demand,

And that the tax increase part is to achieve your vision of social equity without subtracting very much from aggregate demand.

Instead, by doing it the way you are doing it, you are implying that the deficit per se is of economic consequence.

This makes you part of the problem, rather than part of the answer, as you are supporting the deficit myths which are preventing any actual solution from being implemented.

Robert B. Reich has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He also served on President Obama’s transition advisory board. His latest book is Supercapitalism.