Thursday, July 01, 2010

Republicans extend the Great Recession

It is clear from recent legislative actions that the Republicans in Congress want to ensure large electoral gains in November by undermining any possible economic recovery. This cynical ploy needs to be called out by Democrats, so that the American people will see how Republicans will do anything to gain political power.
Republicans know that the surest way of sustaining the recession is to refuse to consider another stimulus. Using the fear of a growing deficit as their main political strategy, the Republicans have successfully blocked the extension of unemployment benefits, while they have convinced the Democrats to move off of their earlier desire to bail out the states that are facing huge deficits. The Republican strategists believe that if unemployment stays high through November, they stand a good chance of taking back both the Senate and the House of Representatives.
The Great Employment Meltdown
Many states with record deficits have been waiting for the federal government to come up with funds for increased Medicaid costs, and now that the Republicans have blocked this funding source, we will begin to see massive cuts to state programs, which in turn, will cause an increase in unemployment. Not only will state workers and teachers lose their jobs, but retail businesses will lose customers at a time when they are already facing large financial difficulties. Also, the viral spread of unemployment will help to push thousands, if not millions, of people into foreclosure, and we will see a further deterioration of construction and real estate jobs.
Without a new stimulus infusion of funding for states, the next round of job cuts may make the first fiscal meltdown seem like a cakewalk. Last year, states were able to put off the misery by relying on billions of dollars from the federal stimulus, but now that this money is going away, there is no safety net left.

Trillions for Banks, Cuts for Workers
It is interesting that while trillions of dollars were used to prop up the financial sector to prevent a global meltdown, no one seems to want to use federal funds to prevent massive unemployment. Due to the fear of increasing the deficit, a new fiscal stimulus appears to be off the table. However, if unemployment soars and foreclosures increase, we will see a massive erosion of our tax base and fiscal health.
The financial problems facing the United States are being echoed throughout the world, and the recent G 20 meeting provided a glimpse into the new consensus. Even supposedly progressive leaders are arguing that it was okay to spend trillions of dollars of public money on bailing out the banks, but now we have to impose strict austerity measures to reduce deficits and scale back social programs and pension plans. The fear of deficits is ruling the world, and we are seeing a global extension of the Reagan-Thatcher agenda. Part of this strategy is to first run up huge deficits through tax breaks to the wealthy and increased defense budgets, and then claim that due to deficits, social programs have to be cut.
Progressives need to stand up against this new consensus, and in America, we have to force Democrats to confront the Republican's cynical strategy. President Obama has to counter both the new international consensus as he promotes a job bill at home that would help to bail out the states.
Bob Samuels on The Huffington Post.
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