The National Commission on Fiscal Responsibility and Reform is sounding the alarm around deficit spending is using exaggerated rhetoric to heighten deficit fear at a time when more spending is needed.
The commission's rhetoric is working against the antidote for the economy spending to restart job and economic growth. Forty leading economists, including nobel prize winners, issued a statement calling for more spending in the short-term. They recognized debt as a long term problem, but urged immediate increased spending to avoid prolonging and deepening the economic collapse, writing:
"We recognize the necessity of a program to cut the mid- and long-term federal deficit but the imperative requirement now, and the surest course to balance the budget over time, is to restore a full measure of economic activity. As in the 1930s, the economy is suffering a sharp decline in aggregate demand and loss of business confidence. Long experience shows that monetary policy may not be enough, particularly in deep slumps, as Keynes noted.
"The urgent need is for government to replace the lost purchasing power of the unemployed and their families and to employ other tax-cut and spending programs to boost demand. Making deficit reduction the first target, without addressing the chronic underlying deficiency of demand, is exactly the error of the 1930s. It will prolong the great recession, harm the social cohesion of the country, and continue inflicting unnecessary hardship on millions of Americans."
The Obama deficit commission is working against this urgent need. And, in pushing proposals that will weaken the middle class they risk real anger from American voters who are already unhappy with the administration's handling of the economy. The commission is talking about cuts to Social Security, Medicare and middle class benefits like the home mortgage deduction rather then focusing on the three causes of the deficit: massive war and weapons spending, giant tax cuts for the wealthy and the faltering economy.
The time is now to build opposition to these recommendations and urge Congress and the administration to cut programs that will not make the economy worse for most Americans. When I testified before the commission I urged: