The disturbing retreat of the stock market the past few days, barely skirting the official bear market boundary before Tuesday's iffy rally, has been more than enough to prove two core points.
One is that no-holds-barred political extremism -- like the garrote employed by Republicans' hard-right Tea Partiers in manufacturing a slow-motion, confidence-shattering political crisis over the specter of a government default -- actually can do severe damage to the economy and to the confidence of investors on which it relies.
The second is that a positive approach to job creation -- the tonic needed to revive economic growth from the nearly static eight-tenths of 1 percent this year -- should not have been allowed to play second fiddle to near-term deficit reduction. It should have been front and center all year.
The tragic irony is that it would have been the top priority if Tea Partiers and the Republican majority in the House of Representatives had not hijacked the jobs agenda, handcuffed Congress, and engaged in a counter-productive assault on near-term pump priming and smart job-growth strategies.
Their insistence that the $14.3 trillion national debt (and any near-term increase that will occur until the economy kicks in gear and regenerates lost tax revenue) must take absolute priority is self-defeating on its face. In fact, every backward fiscal policy they embrace is self-defeating in terms of reducing the long-term debt, restricting new economic growth and resulting tax revenue, and lowering costs to federal and state governments for unemployment and health-care aid.
Eroding investor confidence in the dollar by creating a fiscal crisis, for example, risks raising the interest cost that Treasury must pay on new bond issues to Treasury to service the government's 30-year accumulation of debt. A 1 percent increase in the yield on Treasury bonds, for instance, would add $1.3 trillion to federal debt right away.
Likewise, demanding cuts in already minimal social programs will just make life harder for many American families by raising their cost of living and diminishing their discretionary consumer spending, which accounts for two-thirds of economic activity. Indeed, it is the higher cost to government of economic contradiction -- the enduring ripples from the Great Recession of 2007-2009 and the nearly 8 million jobs shed then -- that still haunts the economy. Sending the nation back to deeper austerity won't reverse that. It will just aggravate the problem and stall recovery.
What ails the American economy is not the cost of Social Security: Its current trust fund surplus could easily be extended for many decades by incremental tweaks and by ending its salary cap for high earners, whose prosperity depends on a broad and healthy middle-class.
Nor is Medicare or Medicaid the core source of our national debt. Indeed, a bona fide national public health care program -- i.e., Medicare for all who would choose to pay that premium -- would drive down overall health cost to the far lower per-capita rates that all other industrialized nations pay for universal care. It would also force private insurers, the pharmaceutical industry and ancilliary providers to compete by streamlining and reducing extravagant executive overhead.
Closing corporate tax loopholes, restoring equity in a progressive tax rate (the nation's wealthiest 1 percent now pay the least percent of taxes they've paid in 80 years) and investing more in clean energy, education and job training and job creation incentives, would do wonders for the economy.
There's no need for a doomsday mindset, not unless our so-called job creators keep off-shoring the nation's jobs. There is just a great need for vigorous, forward-looking leadership, and truth-telling about the corporate shills and Wall Street cronies that the Republican Party has become while scamming the public with so-called family values to camouflage policies that would grind America's marginalized middle-class into the dust.
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