J. Mijin Cha explores the tension between "donor class" preference to focus on deficit reduction versus voters preference to focus on job creation and economic security policies.
by J. MIJIN CHA, Demos
Most available research indicates a significant difference in priorities between the majority of Americans and the affluent that comprise the political donor class, which may explain the current bi-partisan drive for deficit reduction at the expense of stimulus policies, in spite of persistent high unemployment.
Does Washington really care about job creation?
Despite near-record levels of unemployment and meager economic growth, the U.S. political system has focused far more on deficit reduction over the past two years than on job creation. Austerity dominates the current political debate even as the economy struggles to recover from the Great Recession. Bowing to political pressures, President Obama created a national fiscal commission in early 2010 to recommend ways to tame the national debt, and discussion about deficit reduction has dominated Washington since then.
As a result of the debt ceiling showdown last summer, Congress enacted significant spending reductions in the Budget Control Act of 2011, despite predicted near-term job losses. The Budget Control Act set a cap on spending on discretionary programs from FY 2013- 2022 at $1.5 trillion less than current levels. The Act also required across-the-board cuts (sequestration) if the “supercommittee” on deficit reduction failed to come up with adequate measures. As no compromise was reached, without Congressional action, the sequester will begin to take effect in FY 2013. Regardless, $1.5 trillion in spending cuts over a decade will be required starting next year, even if the sequester is avoided, bringing discretionary spending to the lowest level relative to the economy since the Eisenhower administration. If automatic spending cuts occur, an additional estimated 2.1 million jobs will be lost.
During this same period, proposals to address high unemployment and create jobs have seen far less traction in the national policy debate. There was no jobs commission created despite the high unemployment rate. President Obama’s American Jobs Act, introduced in September 2011, went nowhere in Congress and received only modest media attention. Even a bill specifically targeted at helping war veterans, a popular constituency, failed to garner enough support to overcome a filibuster last summer. [MORE]