Yesterday, the Senate passed and the President signed into law a measure increasing the debt ceiling, and making present and future cuts in Federal spending–but no new taxes–averting the immediate crisis of a government unable to satisfy its $4 billion daily borrowing fix. Everybody hates it, but then a good compromise leaves everybody mad.
Except that the plan doesn’t actually cut spending by a meaningful amount in the near term, and anything further in the future can be undone by the next Congress.
Moreover, it sets a dangerous precedent in that the next stage of spending cuts will be determined by a joint committee of Congress, with input from the President, and then be voted up or down with no debate or possibility of amendment. On one level, since politicians don’t seem to have the intestinal fortitude to vote for serious spending cuts, this seems a practical necessity.
But the committee–called ‘super Congress’ by some–has no constraints on what it can include in its ‘spending cut’ package. If they wanted to require all of us to wear lime-green underwear, they could. For now, we can only hope that they’ll limit their concerns to things that will help the government’s finances.
OK, now that the circus is over, how about going back to the economy and creating jobs?
The economy is languishing, with growth in the first quarter restated at a 0.4% annual rate and the second quarter at a 1.3% annual rate. If you exclude banking/finance, and perhaps the oil companies, the rest of us are in a recession.
The government has one thing, and one thing only, it can do to stimulate the economy: it can make money looser. It can do this by tax cuts (the Republican method) or new spending (the Democratic method), but either way, the intent is the same: to provide new money to encourage the private sector to invest and hire, or at least to tide people over.
But in spite of partisan bickering, the spigot has been stuck on ‘loose’ for a long time now. Most Federal spending is preset before the budget process starts: Social Security, Medicare, and interest payments. And the new plan is supposed to tighten things up, even if only incrementally.
So what can the government actually do to create jobs?
For my part, I have no idea.