This week, economists from the San Francisco Federal Reserve released a letter warning that the odds of a recession in early 2012 are now more than 50 percent. Yet there is no proposal pending from the president, leaders in Congress or the supercommittee that will even remotely address the devastation to the jobless or the dangers of recession that would skyrocket the deficit higher.
Every day brings news from Europe that roils the markets, begins new bailouts, creates more joblessness and reminds Americans that unless we deal with deficits and jobs, Greece and Italy today will be the United States tomorrow. Yet we now have another secretive process in danger of repeating the fiasco of the last debt-ceiling war that led to the humiliation of all combatants from both parties.
Respected analysts of the housing industry worry that the Grapes of Wrath-like catastrophe could continue for years. Millions of American homeowners could join the ranks of those who have lost their homes and those whose homes are now underwater. This is a poison at the epicenter of our financial scandals and our pain-drenched economy. Yet banks are increasing foreclosures again, and there is no proposal pending from the president, Congress or the supercommittee to address this crisis.
It might be true that Democrats hold the stronger position. If Republicans sabotage the supercommittee by demanding no sacrifice from the wealthiest Americans, and obstruct even the modest jobs proposals from the president, they will gravely endanger their House majority.
But I warn Democrats and Republicans alike. If our economy does not improve significantly or deteriorates further, as the San Francisco Fed economists warn it might, no incumbent from either party will be safe from voters’ wrath.
The sin of the supercommittee is not that it will fail to reach agreement. I believe there will be some agreement.
The sin of the supercommittee is that it has abysmally failed to begin the broad and serious national dialogue that is essential to building a national consensus behind shared purpose, fair policies and difficult decisions.
The sin of the supercommittee is that it began its business and will probably end its tenure without clearly understanding, rationally accepting and cogently explaining to the nation this paramount economic fact:
No program to reduce the deficit will succeed if the deterioration of the economy continues or worsens. Every 1 percent loss of GDP will increase the 10-year deficit by as much as $3 trillion. This would destroy the deficit-reducing impact of any supercommittee proposal.
Every member of the House, Senate and especially the supercommittee should fully understand the recent testimony of Doug Elmendorf, director of the Congressional Budget Office.
The proper policy would increase the deficit to support the economy in the short run, and lower the deficit by larger amounts and with greater integrity than the supercommittee will probably propose.
I have dissented from major aspects of economic policy for two years, arguing in columns with titles such as “Jobs: An Angry Dissent” and in private memos to high-level Democrats, that far more aggressive action to create jobs and to lower deficits are both urgently needed.
The supercommittee should reach a bipartisan agreement to lower the deficit by at least $2 trillion to $3 trillion over 10 years. Achieve this through modest cuts in diverse programs that need not impose hardship on the hurting, ask wealthy Americans to make their fair contribution and include far stronger short-term support for jobs than is on the table today.
The sin of the supercommittee is that it has merely mirrored the old-think politics it was created to rise above. The opportunity of the supercommittee is that there are some smart members on it. They know the right thing to do. Just do it.
Brent Budowsky was an aide to former Sen. Lloyd Bentsen (D-Texas) and Bill Alexander (D-Ark.), then chief deputy majority whip of the House. He holds an LL.M. in international financial law from the London School of Economics, and can be read on The Hill’s Pundits Blog and reached at [email protected].