Breaking out of the current frustratingly slow growth in the developed world requires a blend of short-term stimulus and longer-term restraint. Unfortunately, in Europe and the United States, we have been following these policies in reverse -- constraining public-sector spending in the near term while doing nothing effective to prevent deficits in the future.
In the United States, cuts in public-sector spending have caused the loss of 550,000 public-sector jobs -- think teachers, police, and firefighters -- since January 2009, adding to the raw unemployment numbers and removing the multiplier effect that takes place when employees spend their paychecks. The result: Despite gaining private-sector jobs every month for the past 21 months as of November, we have been badly hurt by reduced public-sector spending, which has cut jobs and economic growth.
Yet my Republican colleagues have insisted on retaining all of George W. Bush's tax cuts, thus all but guaranteeing that future revenues will continue to fall far short of what is necessary to reduce U.S. debt and create the conditions for a strong recovery.
One major change that can reverse this: a substantial reduction in America's military spending. In the current fiscal year, the United States is spending upwards of $650 billion on its military, including the costs of the wars in Iraq and Afghanistan. This is far more than it spends on Medicare and, more importantly, considerably in excess of what is required for America's legitimate national security needs. Read more.....