Washington, August 04: AP/Carolyn KasterFor months, polls have reported that reducing unemployment is Americans’ top political priority — and certainly a much bigger priority than reducing the deficit. This makes economic sense because of the connection between the two issues. As any Economics 101 course shows, creating new jobs is one of the best ways to reduce a nation’s long-term deficits, because creating jobs generates tax revenues and grows an overall economy, thus shrinking debt both in real terms and as a percentage of GDP.
Somehow, though, Americans’ top priority is Washington’s lowest. That’s not what you hear, of course. On Tuesday, President Obama insisted to great fanfare that he’s completely focused on creating new jobs. But a look past the spin and to actions shows that the rhetoric is the typical up-is-down Orwellian nonsense that has come to define the Obama era. What we are in fact witnessing is the final epic inverse of the New Deal and Great Society, as Washington openly declares war on American jobs.
The first volley is the debt deal; despite the pro-jobs packaging, it is calibrated to kill the existing jobs we have here in the United States. As Mohamed El-Erian, CEO of one of the world’s largest bond investment firms, told ABC News: “Withdrawing more spending at this stage will make [the economy] even weaker … [meaning] unemployment will be higher than it would have been otherwise, growth will be lower than it would be otherwise, and inequality will be worse than it would be otherwise.” Because of this, the debt deal probably won’t even achieve its stated purpose either. As Nobel Prize-winning economist Paul Krugman points out: “Slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse … which will in turn reduce future revenue” — which will, of course, preserve, rather than reduce, the national debt.
–Agencies