Is Deficit Reduction More Important Than Jobs ?

There is an argument in this country right now.   The argument is over whether the nation's deficit or unemployment is the most important thing for the government to attack.   The Republicans floated the lie in this last election (and it seems to have worked for them) that the two are connected.   They say once the deficit is reduced then jobs will somehow magically be produced.   This idea is not just wrong -- it is ludicrous and backwards.

Reducing the deficit will not produce jobs.   It will just hurt Americans even more who are already hurting.   But job creation can have a very positive effect on the deficit.   As more people go back to work, it means there are more people paying taxes (assuming it's not at the minimum wage jobs Republicans love).   As the number of taxpayers increases, so does the amount of tax revenue.   As the tax revenue increases, the deficit is lowered.

Fellow blogger, Badtux the Snarky Penguin, points out a few facts the Republicans ignore (or don't want to admit).   He says:

First of all, the federal deficit last year was approximately 6.5% of U.S. GDP. In the worst case, the deficit can be financed by simply printing money -- which would give us a net inflation rate of 6.5% per year. Which is not good, but hardly Weimar Republic style hyperinflation either, we've had 6.5% inflation multiple times within my lifetime and it seemed to have essentially no effect on jobs. . .So inflation caused by printing money to cover the deficit would not cause loss of jobs.
Nevermind that the only Depression within the past 100 years (besides the current one) was ended by government spending on a massive scale and accompanied by massive deficits -- that is, World War II, which had average deficits of 25% of U.S. GDP during the course of the war.
So what will be the effect of austerity and massive federal budget cuts? Well, what do you think -- it'd be further economic collapse as demand falls even further and more businesses and homeowners default on their loans and more banks collapse and wash rinse repeat. 


So a deficit is not the end of the world (or the country).   We have had larger deficits in the past (as a percentage of GDP) and we have grown out of them, but it took job creation to do it, not deficit reduction.   Cutting the budget without first creating jobs will throw the country into a deeper recession (which will probably someday be called a Depression).

But the Republicans don't just want deficit reduction.   That would be bad enough, but they want to increase the deficit by giving the rich massive tax cuts, and then make the poor and working classes (and the middle class) pay for it by cutting benefits of social programs like Social Security, Medicare, Medicaid, etc. -- in other words, put the burden for deficit cutting on everyone but those who could afford it (the rich).

If we must cut the deficit right now, and I think that would be a mistake, why must it be on the backs of workers (as the recent deficit reduction committee seems to want to do)?   There are other alternatives -- alternatives that make a lot more sense than the ones proposed so far.   The blogger Godless Liberal Homo offers these suggestions:

- Cutting off all funding to the Iraq and Afghanistan wars.

- Closing the majority of military bases abroad.

- Getting rid of the Bush tax cuts for the rich.

- Getting rid of the Clinton and Reagan tax cuts for the rich.

- Raising corporate taxes.

- Instituting luxury taxes.

- Instituting an SUV tax.

- Repealing all corporate controlled trade agreements and withdrawing from the World Trade Organization, making it possible for our government to expand revenue from tariffs, traditionally one of its major funding sources.

- Initiating a tax on all short term stock, bond, mutual fund, commodities, hedge fund, derivative, and other transactions involving financial instruments. (Call it the Bubble Prevention Tax.)

- Cut back on wasteful and unconstitutional homeland security spending

- An end to covert operations in Iran

- End of all aid to Israel

- End of aid and support for the fascist dictatorship in Colombia

- Legalization of Marijuana

- Sentencing crack like other cocaine

- Legalizing other victimless crimes such as gambling and prostitution.

- Taxing capital gains (other than primary home sales) like income actually earned by working


I'm not in favor of cutting the deficit right now, especially at the expense of workers and those living on fixed incomes.   We really should be spending more, but doing it wisely on real job creation (instead of tax cuts which are very poor job creators).   But if the government is determined to make deficit cuts, don't these cuts make more sense?