After the election, Congress will make some high-stakes decisions about jobs and taxes that could have serious consequences for working families and the economy. A new report by the Economic Policy Institute (EPI) should serve as the working families’ guide to the post-election debate.
Here are some of the decisions facing Congress when they return: the federal unemployment benefits program expires at the end of December. The Bush tax cuts also expire automatically and Congress will have to decide whether to extend them for the middle class or also extend them for the richest 2% of Americans. Thanks to last summer’s debt ceiling agreement, across-the-board budget cuts are scheduled to take effect in January 2013. If Congress makes the wrong calls on these high-stakes decisions, we could have another recession in 2013.
EPI recommends a sensible principle to guide these high-stakes budget decisions: continue the policies that are most effective in creating jobs and have the most “bang for the buck,” and discontinue the policies that don’t work and waste money.
Which are the ones that don't work? Well, cutting taxes yet again for the richest 2% of Americans is one of the least effective things you can do with $1 trillion. About the only policy with less “bang for the buck” is cutting estate taxes. If we have a recession, it will not be because we stopped giving tax cuts to rich people.
What policies have the most “bang for the buck”? EPI recommends undoing the debt ceiling agreement from last summer, which threatens short-term job creation and long-term economic growth. The next most effective things Congress could do are to extend the unemployment benefits program, invest in infrastructure and avoid layoffs at the state and local government level.
EPI concludes that:
Replacing ineffective policies with cost-effective fiscal support would also reduce the budget deficit…true deficit hawks who also seek to alleviate persistently high unemployment would be extraordinarily vigilant in ensuring that only very effective fiscal support measures were preserved in upcoming negotiations over the fiscal obstacle course and that cost-effective economic policies replace ineffective policies.
EPI is right. We are heading for a “fiscal obstacle course,” not a “fiscal cliff.” We risk very little harm to our economy by letting tax cuts for the richest 2% expire on schedule. But we do jeopardize our economic future by letting the richest 2% bully the rest of us into making bad budget decisions.