The Other I

August 23, 2011

On earthquakes

MapThe news here in England tonight is dominated by the rebels victory over Gaddafi’s compound in the heart of Tripoli.  But there was room to fit in the news that a 5.9 earthquake has led to the evacuation of the White House and the Pentagon.  People as far north as New York City saw skyscrapers shaking like a quivering string.

5.9 is pretty strong but it sounds as if the damage this quake causes will be minimal.

I’m not so sure about a more figurative earthquake if the Joint Select Committee on Deficit Reduction appointed to recommend a federal budget by November fails to agree.  The issues are pretty divisive:

  • The Democrats want to tax the “rich.”  The Republicans are dead set against it.  But by “the rich,” the Democrats don’t mean just millionaires and billionaires.  90% of the “rich” under this definition aren’t millionaires.  Many are the small-business entrepreneurs whom the country needs to create millions of jobs.  Taxing them might release some of the outrage against greedy bankers but it could potentially hurt the economy a lot more than help it.
  • Unfortunately, what the Republicans means by “no new taxes” is absolutely that.  Never ever again should tax rates be raised.  The size of government should be permanently cut down to size.  The problem with this position is that without some tax increases, entitlement programs like social security and medicare and many public services like policing and teaching will have to be drastically cut.
  • Besides cutting government spending too much too fast could derail the economy which is teetering on a second recession as we speak.
  • But, Republicans argue, if we don’t cut spending, interest rates will rise, increasing our deficit and creating a downward spiral by a different route.  This argument, though, seems – thankfully – to be questionable.  U.S. borrowing costs (ie, interest rates) have not risen following the S&P downgrade of American debt from AAA to AA standard.
  • In fact, evidence from this side of the Atlantic from countries like Greece and Spain suggest that government spending should not be cut in the short-term but that a credible plan for serious deficit reduction should be worked out now and begin to bite in two years or so.  But first, create jobs now by encouraging private enterprise and by government programs to improve our crumbling infrastructures – our road and transportations, electricity, water and sewage systems.

Will the government be willing to do it?  Or will Congress drag a Trojan Horse into the center of Washington and watch the economy be destroyed by premature cuts in government spending and a “don’t-distract-me-with-facts, I’ve-already-made-up-my-mind” puritanism from the Tea Party?

By November we may have some idea of our fate.

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