My Word: Right thing, right time for economic recovery
November 18, 2010 (the Orlando Sentinel)
By Doug Maukonen
"I didn't see that one coming." In movies, there is probably no line more often repeated.
President Obama's bipartisan commission's report this past week on how
to deal with the budget deficit illustrates not only the severity of
our national debt, but the difficult choices in dealing with the
problem — everything from raising taxes to cutting Social Security and
raising the retirement age.
If you are a deficit hawk, this is how you get to a balanced federal
budget. Notice that cutting taxes is not one of the options. Anyone who
claims reducing the budget deficit is possible using any other
prescription simply doesn't understand the complexity of the issue.
We are still in a severe economic downturn; the stock markets and
company profits may be up, but the effect is not seen on Main Street
where unemployment remains high and wages low. We cannot exit this
downturn and balance the budget at the same time; we will exit this
downturn only when more jobs are created than lost and at a far greater
pace than we see now. Businesses create jobs when business grows;
business grows when people spend; people spend when they have jobs. It
really is that simple.
Some propose cutting taxes to businesses large and small as a remedy.
But businesses do not hire when taxes are cut during hard times; the
big ones save, and the small ones reduce debt or lower prices to bring
in more business. Cutting individual taxes whether for the rich or our
shrinking middle class will increase savings but not translate into
more jobs. Remember the failure of Reagan's famous trickle-down
Economist John Maynard Keynes in the 1930s argued that employment
follows demand for goods and services and that when people save rather
than invest, unemployment rises. Cutting taxes, unless targeted to
investment, has no direct effect on job growth. It was Keynes who also
proposed that during the Depression the public sector must spend into
debt and recover from the debt during times of prosperity. Raise your
hand if you think we are in a time of prosperity.
To recover to a point where we can address the national debt, the
government needs to invest more and wisely in infrastructure, education
and research — areas where we can add jobs to the benefit of our nation
and our eventual recovery.
While balancing the budget is in the nation's interest, timing is
everything. Balancing the budget now, without job and wage growth, will
likely result in prolonged severe unemployment and a longer recovery
than this nation can afford. It is not just about doing the right
thing, but doing the right thing at the right time.
Doug Maukonen lives in Oviedo.