The New Normal

July 19, 2011 | Blog

Too many Americans appear willing to accept the hand they’re dealt. Most shockingly, many of our political, educational and civic leaders seem to have fallen into the same trap. “The New Normal,” they call it. Like Death and Taxes. Etched in stone. Undefined, yet not re-definable. Inevitable.

Fortunately, there are those among us willing to demand a new deck of cards — and a new dealer!

We’ve seen the rise of the Forces For Fairness in states like Wisconsin where there is no disguising the unsubtle, in-your-face, anti-democratic, vitriolic, bought-and-paid-for policies of Governor Scott Walker, the Brothers Fitzgerald, ALEC, the Koch Brothers and their yes men and women (even the few remaining Republican moderates – if they still can be called such – who should know better). In the Badger State, tens of thousands took to the streets of Madison and are now actively participating in recall efforts to change the equation and prevent Wisconsin from being turned into a place totally unrecognizable.

Nationally, I see a rising consciousness and an emerging consensus that congressional Republicans have one-upped their Gingrichian colleagues from the 1990s in overreaching on fiscal matters. Voters do not like the draconian cuts being pushed through by House Republicans, the intransigence and obstructionism practiced as a religion by Senate Republicans, the GOP’s willingness to hold America’s bond rating and our economic recovery hostage by refusing to raise the debt ceiling, and an adherence to a baseless and extremist anti-tax philosophy. In a recent CBS News poll, 71 percent of Americans are opposed to the way the Republicans are approaching the debt limit debate. As well they should be.

Americans are NOT opposed to raising taxes on the wealthy to address our national debt. A recent Reuters poll found that 52 percent of Americans believed that “a combination of spending cuts and tax increases was the best strategy to reduce deficits.” Republicans are so constrained by anti-tax pledges that they even believe a repeal of ANY tax cut or the closing of ANY tax loophole (even those for corporate jet owners!) would result in Grover Norquist gagging them with a mouthful of tea bags and ordering them to a permanent political purgatory.

If more Democrats had shown the courage to stand up sooner and establish the terms of the debate, this emerging consensus could have been precipitated. The likes of Vermont’s Bernie Sanders have had it right for some time in the call for “shared sacrifice.” Others, including President Obama, appear to be catching up to the reality that was evident to Sanders and other Progressives: Congressional Republicans are economic extremists willing to drive the American economy into the ground in order to assuage the Anti-Tax God (don’t let it go to your head, Mr. Norquist).

“The Rock and the Hard Place on the Deficit”, an op-ed in last Sunday’s New York Times, written by Christina Romer, is one of the best articles I’ve read that puts the substance of this issue into context. For the benefit of you non-Times subscribers, here are some key highlights:

The economic evidence doesn’t support the anti-tax view. Both tax increases and spending cuts will tend to slow the recovery in the near term, but spending cuts will likely slow it more. Over the longer term, sensible tax increases will probably do less damage to economic growth and productivity than cuts in government investment.

There is a basic reason why government spending changes probably have a larger short-term impact than tax changes. When a household’s tax bill rises by, say, $100, that household typically pays for part of that increase by reducing its savings. Its spending tends to fall by less than $100. But when the government cuts spending by $100, overall demand goes down by that full amount.

Wealthier households typically pay for more of a tax increase out of savings, and so they reduce their spending less than ordinary households. This implies that tax increases on wealthy households probably have less effect on the economy than those on the poor or the middle class.

All of this argues against any form of fiscal austerity just now. Even some deficit hawks warn that immediate tax increases or spending cuts could push the economy back into recession. Far better to pass a plan that phases in spending cuts or tax increases over time.

But if federal policy makers do decide to reduce the deficit immediately, reducing spending alone would probably be the most damaging to the recovery. Raising taxes for the wealthy would be least likely to reduce overall demand and raise unemployment.

The politics behind this issue is another matter. But it has huge implications for issues like education. Too many educational advocates, policy types, and yes, even elected leaders seem all too willing to accept “The New Normal” — and even pontificate about it — as opposed to fight for a new deal and attempt to redefine the debate. President Obama too often appears to allow congressional Republicans to define the terms of the conversation, such as tying long-term deficit reduction to the debt ceiling, as Robert Reich noted over Twitter yesterday.

There’s a time and a place for acknowledging political realities and accepting half a loaf. The problem is we’ve entered the second coming of the Robber Barons where the rich are hoarding their loaves of bread and too many Americans aren’t getting a chance to get their hands in the dough at all. Until we address the historic economic inequality in this country and put spending power back in the pockets of working families, there is a tremendous likelihood that the economy will never fully recover. Never. That requires us — and our elected leaders — to speak out and act.

The time is now. Reality is what we make it. More of us have got to be willing to step up and say, “Enough!” I’ve witnessed Democrats and independents get energized in Wisconsin. We need a similar dynamic to take hold nationally. My guess is that it will build in time. But will it be enough to change the equation?

The forces of fiscal lunacy had better listen to the American people now or my guess is that they’ll be hearing from the silent majority of sensible Americans at the ballot boxes in 2012 — and even sooner in states like Wisconsin. If the “Republican Revolution” in the 1990s is any signal, past is prologue.

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