EPI: Debt Ceiling Deal Will Do Great Harm to Our Nation

Statement by EPI President Lawrence Mishel on the proposed agreement to raise the debt ceiling:


This proposed debt ceiling deal tentatively concludes a needlessly manufactured crisis and will do great harm to our nation.

......There is no economic necessity to undertake spending cuts or deficit reduction plans at this point in the economic recovery, when high unemployment is expected to persist for several more years. Jobs should be the priority and jobs are the path to get our nation’s fiscal situation to a responsible place. A long-term deficit reduction at this time should only be done if coupled with substantial deficit-related supports to the economy to rapidly lower unemployment this year and next.

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Phase One

The agreement calls for reductions in nominal (not inflation-adjusted) spending over the next two years which will only act to slow the recovery. Absent from this deal is any continuation of the Emergency Unemployment Compensation (for unemployment insurance benefits beyond the twenty-six weeks provided by most states).......
........ guarantees an even higher level of unemployment than the dismal rates already expected.

.....The spending caps do not allow the budget to meet our nation’s basic needs for public investment, regulation and other domestic needs. The spending caps will reduce non-security domestic spending to just 1.8% of GDP in 2021, the lowest level since the 1950s and the amount we now spend on public investment. Thus, this spending level will not allow us to both maintain current levels of public investment and the normal functions for housing, criminal justice, regulatory enforcement and other needs.......

Phase two

The debt ceiling compromise also charges a small bipartisan group of 12 members of Congress to propose $1.5 trillion (or more) in additional debt-reduction. If they agree on a package, the proposed legislation would be fast-tracked for a vote in both the House and Senate....

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http://www.epi.org/analysis_and_opinion/entry/epi_president_critical_of_proposed_debt_ceiling_deal/


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What’s missing from the debt ceiling debate? Jobs

John S. Irons

August 1, 2011

The unemployment rate, currently above 9 percent, is projected to remain high for a long time......
.....The agreement to raise the debt ceiling just announced by policymakers in Washington not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs.
The spending cuts in 2012 and the failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012, relative to current budget policy.

The agreement would reduce spending by at least $1 trillion over 10 years through budget caps on non-mandatory programs, with additional reductions under discussion in a second phase. While the bulk of the cuts are back-loaded – coming more in the future – the near-term cuts would still have an immediate impact.
Applying conventional multipliers, the reduction of $30.5 billion in calendar year 2012 would reduce GDP by 0.3%, and result in roughly 323,000 fewer jobs (as depicted in the table below).

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The payroll tax holiday reduced the Social Security payroll tax for all workers by two percentage points. Extending that tax cut for another year would provide roughly $118 billion in stimulus through increases in employees’ take-home pay, which would boost economic activity by an even greater $128 billion. Allowing this policy to expire would lower GDP by 0.8% in 2012, and would lead to roughly 972,000 fewer jobs. It should be noted that while the payroll holiday creates jobs, there are more effective ways to target tax policy to those most likely to spend the extra income, creating an even bigger bang-for-the-buck without some of the negative side-effects. (See Fieldhouse 2011.)

The continuation of unemployment insurance benefits to long-term unemployed workers (up to 99 weeks of benefits) is also set to expire at the end of the year. Allowing that provision to expire on schedule would mean $45 billion less in assistance to unemployed workers, and $70 billion less in economic activity (unemployment insurance has one of the largest bang-per-buck of any job-creation policy). That reduction in purchasing power would lower GDP by 0.4%, and mean roughly 528,000 fewer jobs. Approximately 3.8 million Americans currently receive unemployment insurance because of this program; failure to continue these emergency benefits would put an additional drag on the economy.

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http://www.epi.org/analysis_and_opinion/entry/whats_missing_from_the_debt_ceiling_debate_jobs/

And certainly not a helpful one.

or will you stand with your representatives and claim victory while your neighbors suffer? I plan to give helping my neighbors a try if I don't lose what I have left myself since I am self employed. My hands are clean.

RW policies rather than using constitutional remedies (14th Amendment) to stop the extortion dead in its tracks, thereby preserving, protecting, and defending the Constitution, that is unless you are getting seemingly your heart's desire. :patriot:

to lie about our present day situation....