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Reich writes: "The President should make crystal clear that America faces two big economic challenges ahead: getting the economy back on track, and getting the budget deficit under control."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

The President's Opening Bid on a Grand Bargain

By Robert Reich, Robert Reich's Blog

14 November 12


hen he meets with Congressional leaders this Friday to begin discussions about avoiding the upcoming "fiscal cliff," the President should make crystal clear that America faces two big economic challenges ahead: getting the economy back on track, and getting the budget deficit under control. But the two require opposite strategies. We get the economy back on track by boosting demand through low taxes on the middle class and more government spending. We get the budget deficit under control by raising taxes and reducing government spending. (Taxes can be raised on the wealthy in the short term without harming the economy because the wealthy already spend as much as they want - that's what it means to be rich.)

It all boils down to timing and sequencing: First, get the economy back on track. Then tackle the budget deficit.

If we do too much deficit reduction too soon, we're in trouble. That's why the fiscal cliff is so dangerous. The Congressional Budget Office and most independent economists say it will suck so much demand out of the economy that it will push us back into recession. That's the austerity trap of low growth, high unemployment, and falling government revenues Europe finds itself in. We don't want to go there.

Although the U.S. economy is picking up and unemployment trending downward, we're still not out of the woods. So in the foreseeable future - the next six months to a year, at least -the government has to continue to spend, and the vast middle class has to keep spending as well, unimpeded by any tax increase.

But waiting too long to reduce the deficit will also harm the economy – spooking creditors and causing interest rates to rise.

This is why any "grand bargain" to avert the fiscal cliff should contain a starting trigger that begins spending cuts and any middle-class tax increases only when the economy is strong enough. I'd make that trigger two consecutive quarters of 6 percent unemployment and 3 percent economic growth.

To make sure this doesn't become a means of avoiding deficit reduction altogether, that trigger should be built right into any "grand bargain" legislation - irrevocable unless two-thirds of the House and Senate agree, and the President signs on.

The trigger would reassure creditors we're serious about getting our fiscal house in order. And it would allow us to achieve our two goals in the right sequence - getting the economy back on track, and then getting the budget deficit under control. It's sensible and do-able. But will Congress and the President do it? your social media marketing partner


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+31 # VoiceofReason613 2012-11-14 10:04
Excellent analysis, as always from Robert Reich, but we should also consider that we are heading toward a climate catastrophe (with Hurricane sandy just a sample of what climate scientists are projecting for a much hotter world) and other environmental disasters. Yes, of course we must try to get our economy back on track, but in a way that will be environmentally sustainable.
+9 # mdhome 2012-11-14 20:21
Wind/solar energy needs to become a major item on the to-do list if we are going to survive in the future, to do otherwise is to ignore the consequences of the severe changes in weather we can expect to see in future years. Put the coal miners to work building wind turbines and installing solar panels, it is working in northern Europe and China and we can do it in the USA.
+26 # BradFromSalem 2012-11-14 10:09
I really agree with Robert Reich almost as much as anybody out there. But this is one of his posts that read like it has another purpose. That purpose is to telegraph what the current White House thinking is. I really believe somebody in the administration feeds Reich information so that they can see what the Progressive reaction is to it.

My reaction is, deficit, shmeficit, who needs it? A trigger is nice, but what about a safety switch the other way? The deficit will go away when we increase revenues and eliminate waste. Revenues will go up as the economy improves. Period. Waste is the big kahuna. Waste is NOT having a Single Payer Health Care system. Waste is means testing everything. Waste is outdated laws and regulations. Fixing waste is not cheap, we will need to spend a lot of money rooting out the waste, it called an investment. Until the economy improves AND waste is dramatically reduced, lets not look at the deficit at all. Its a symptom, not the disease.
+14 # Janice 2012-11-14 11:29
Absolutely correct. This worry about the deficit is the Republicans way of deflecting addressing the problem of unemployment and the sluggish economy. Once jobs are created and the middle class keep their tax breaks the deficit can be addressed. JOBS JOBS JOBS infra structure infrastructure infrastructure .......
+10 # DaveM 2012-11-14 11:34
This nation has an opportunity to solve, or at least begin to solve, a major problem with a small amount of government money. We have thousands of factories sitting idle, and countless unemployed workers in need of jobs. I propose that grants, or at least subsidized loans, be provided to anyone will to open those factories and manufacture renewable energy or energy conservation products.

Create jobs (and taxpayers), prop up a bit of America's infrastructure (and increase the demand for other parts of it--e.g. rail shipping), and take a bite out of our demand for oil and dependency on foreign countries for energy. AND cleaner air besides.

I suspect it would be a government initiative that would ultimately pay for itself, and in more than one way.
+16 # bobvreecarmel 2012-11-14 11:34
I don't think Robert Reich is telegraphing what the White House is thinking. He has been a frequent critic of White House actions. I think he is giving advice, plain and simple, and it is sound advice.

I'm also quite certain that he is aware of all the complications regarding the environment and waste and bureaucracy. But good advice must be focused and distilled. Reich is very strong in his ability to explain and clarify
+11 # reiverpacific 2012-11-14 11:41
As an economic dolt, I'm always glad of these reasoned little tutorials from Dr Reich with his ability to make the deliberately obscure and obtuse language and thinking of economics (admitted by Dr Richard Wollf, author of "Capitalism Hits the Fan") just a tad more transparent to the likes of y'rs truly.
It also give me a bit of valid ammunition to use if a discussion ever arises on this subject among the 'higgerant, blinkered reactionaries I run into occasionally in my area of residence.
Much appreciated.
+14 # Barbara K 2012-11-14 11:48
I think we need to Tax the Wealthy to what they are supposed to be paying. Gut all fossil fuel subsidies, that is a terrible waste of money, they are making huge profits and we shouldn't be paying them to screw us at the gas pumps. I think those alone would be a great start and then other things will take care of themselves, if we let them. Jobs will be created by us, the REAL job creators. The millionaires are not job creators, unless you include the jobs they create in other countries. They just make money, not jobs here. Stop coddling them. They have been living off our backs long enough, time for them to pay their share. The deficit will end up taking care of itself once we get some tax money into the economy. Pass the President's Jobs Bill that has been languishing in the House for over a year. That will give millions of people jobs and repair our infrastructure, that is badly in need of repair or replacement.
+7 # Hey There 2012-11-14 12:49
I'm with you. Jobs are needed, sure enough but living wage jobs are the jobs that are needed.
Right now Darrell Issa with HR2309 has written a letter to President Obama urging him to pass HR2309. This bill has not yet reached the House for a vote but if passed it would gut the unions of the second largest employer in this country with reduced wages and benefits for the workers as well as a depletion of at least 100,000 workers and a reduction in compensation for those injured on the job.Service to the public would be decreased by closure of rural and inner city Post Offices and mail would be delayed by closure of 200 or so distribution centers.
The excuse given is that the Post Office can't meet the 75 years of retiree health benefits in 10 at 5.5 Billion a year passed by Bush in 2006.
Before these payments imposed by HR6407 were put in place the USPS had expenses covered by mail delivery equal their income.
This bill is a direct attack on living wage workers and if implemented would inevitably lead to full privatization of the Post Office. It's the Walmartinizatio nof of Post Office employees while upping the price of postage with less service.
I like your post but with the added comment that living wage jobs and service to the public need to be kept and not demolished into a scrap heap of barely getting by jobs.
+6 # BradFromSalem 2012-11-14 15:46

Issa's bill as you describe it is exactly backwards from where we can be heading.

The Labor laws do need to be revamped, and with only 3 changes.

I order for an employee to be exempt (from OT; aka salaried), they must earn at least 75% as much as the highest paid employee.

Overtime kicks in at 36 hours/week. Existing employees have their hourly rate adjusted up by 10% to compensate.

Minimum wage is 67% of the living wage in the county where you work.

I know there are a lot of rough edges, but this alone will probably increase employment by 5% immediately. Instant stimulus and it costs the taxpayer nothing!
+7 # Regina 2012-11-15 01:30
Issa is always backwards from reality and human decency. I have a relative living in his district, and she despairs of ever seeing someone else elected there.
+10 # Dave Parsons 2012-11-14 11:57
I would make a request that ties into this topic regarding the framing and labeling of Medicare and Social Security. Medicare and Social Security should be called PAID BENEFITS. These are programs that our legislators decided were wise and necessary for our society. Social Security is even a PRE-PAID BENEFIT that every citizen supports over there life. Calling them 'entitlements' is slanted, negative and disingenious.
+7 # Hey There 2012-11-14 12:06
To get things done it isn’t wise
To start out with a compromise
For a compromise can be unfair
Giving one side the lion’s share
Conflict over an unreasonable demand
Needs to be dealt with by taking a stand
To fight for what should be done
To side step ending at square one
Compromise ends conflict when differences are small
But for large differences it doesn’t work well at all
For between compromise and capitulation there’s a thin line
That causes just causes to wither on the vine
Those who voted for you
Hoped their goals were yours too
That meeting the needs of the 99%
Would now take precedent
Over the wants of the 1%
So now that you continue as President
Shouldn’t the rich pay more than a little more?
Would an executive order help even the score?
For those who opposed your election
Said the country should go in a different direction
They aren’t partners on your team
They’re pushing their own schemes
To increase the wealth the rich possess
And make those with less have less
Are now in a position to concede
While the President in top position should lead.
-7 # charsjcca 2012-11-14 12:19
Let me see. Do we get a new credit card regardless of what the numbers look like? I think I prefer Simpson/Bowles and the fiscal cliff.
+7 # vicnada 2012-11-14 12:25
A big YES again for Robert Reich. Thinking about his last article's opening bid on the Grand Bargain, I wonder why he didn't suggest eliminating the cap on Social Security payroll taxes. My accountant indicates that this alone would save Social Security as we know it. He calculated that the fund would gain back at least $60K per year each each million taxed from high earning participants. Seems like a no-brainer.
-4 # Depressionborn 2012-11-14 12:28
“In the end, more than freedom, they wanted security. They wanted a comfortable life, and they lost it all – security, comfort, and freedom. When the Athenians finally wanted not to give to society but for society to give to them, when the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.”
― Edward Gibbon
+2 # Billy Bob 2012-11-15 17:04
They probably didn't feel any responsibility to each other. We HAVE a responsibility to each other. That's one of the things that separates us from the Greeks. We also don't keep slaves (anymore).
+2 # Billy Bob 2012-11-15 17:07
If you really were born during the Great Depression, you're awfully lucky we had a President and a Congress at the time that were willing to do something about it. We found out that we, as a nation, were responsible for each other and needed to do something to take care of one another. If it were not for FDR and the New Deal, we probably would have gone communist, hard socialist, or had a violent revolution.

It wasn't a lack of responsibility, but a sense of NATIONAL responsibility that saved us.
+1 # Depressionborn 2012-11-15 18:11
I'm 78, really. But you are right, we lived poor in the depression. We didn't know it because everyone was poor. Try living without running water and cooking with wood or kerosene before doubting my age. And yes, everyone helped, although no one had a right to force another.

When you learn to read you might try Gibbon. You could always use a dictionary for the big words
0 # Hey There 2012-11-15 23:20
Right you are. All revolutions, revolts occur when there is a great disparity between those who have and those who don't.
While the French and Russian Revolutions are the most well known there were many conflicts during the Great Depression, some very serious that could have tipped the USA into what you stated were it not for FDR
+1 # Depressionborn 2012-11-16 08:56
I believe Hitler and Napoleon both came to power after debased currency caused deprivation. They both went on to war. Perhaps we should study history more and ourselves better; and quit blaming each other, as there seems to be enough blame to go around.
+7 # Michael Lee Bugg 2012-11-14 13:35
The Republicans have wanted these deficits since Clinton ushered in budget surpluses in 1999! They want the deficits to justify cutting all social programs and regulatory agencies and leave nothing but our extremely bloated military-indust rial complex through which many wealthy Americans receive billions of tax dollars for the weapons, materials, and services they provide! Military spending does nothelp the economy the way infrastructure and welfare programs do. If they did, Bush's two wars and bloated defense budgets should have made our economy sing! The money wasted on military adventurism and Cold War style weapons could put millons of Americans back to work making and assembling or emplacing the materials needed to expand or improve our infrastructure. Those things would have lasting value for our economy and the workers would have more than just an employment check to increase the demand for regular consumer goods! Behind Bush's tax cuts the biggest contributor to our deficits is high unemployment! Cut the corporate income tax to zero for five years, but make individual tax rates more progressive with at least 15 brackets and have a top tax rate of 90% on ALL income over $100,000,000.00 , and taper rates down to ZERO % on income under $10,000.00! Even the richest people would benefit equally from this zero bracket because they would not pay tax on their first $20K either! The bad news is that this ecosystem cannot survive such high levels of consumption!!!
+3 # Rita Walpole Ague 2012-11-14 19:26
Yep, Michael Lee Bugg, the MIC, and it's power over all and greedy grab is the warning come true made by Pres. Ike as he left office. Anyone not getting where from came this 'recession' (while the 1%ers have made more $$$ than ever) needs to take off the blinders and leave La La Land behind. And, of course more taxes on the wealthiest, and, also much needed: no more loopholes and shelters for the villainaires. Anyone know whatever happened to the M.P.'s attempt in Great Britain to close down the Cayman Islands' $$$ dumping grounds, with the likes of Romney hiding wealth beyond belief?
+2 # Dion Giles 2012-11-14 19:07
Has anyone noticed the elephant in the room? Endless discussion about deficit and deprivation and how to confront it while America and its sycophants fund an ongoing series of colonial wars with more in the pipeline, and a massive, parasitic military industrial establishment which drains the country's coffers, gobbles up half the country's stocks of fossil fuel, and condemns its citizens and the people of other countries to death in faraway battlegrounds for empire. It’s not a separate issue from deficit and deprivation, it is the biggest single cause of it. Who is to confront THAT, as the President sure as hell won't as he is in cahoots with it?
+1 # Michael Lee Bugg 2012-11-15 09:40
Great pointabout the military consuming fossil fuel, namely oil, at atremendous rate. Our military is the biggest single user of oil in this country, and for what benefit to whom? That 'demand' helps to reduce the supply thus helping to keep prices high for the rest of us and they are wasting oil that should be used by our descendants to produce and transport food, produce and distribute raw materials and finished products, and to provide fuel for getting to and from work and other places. Also consider what the military's consumption of steel and rare earth metals like iridium and platinum is doing to the cost of them thus making cars and electronic devices cost more than they should! Ironically, our bloated military is one of the biggest threats to our country and way of life, right behind insatiable greed, ignorance, and prejudice!
+3 # RMDC 2012-11-15 04:38
I hear that Tim Geithner is leaving his job as Sec. of the Treasury. Why won't Obama appoint Robert Reich to this post? At least he understands the issues. Oh, but I forgot. Reich does not work for a wall street bank. He's not a lackey for the billionaire class. If Obama does not appoint Reich and he does appoint another Goldman Sach lackey, does that mean Obama is a lackey for the wall street banks.
+2 # RMDC 2012-11-15 04:41
"But waiting too long to reduce the deficit will also harm the economy – spooking creditors and causing interest rates to rise."

Here Reich is wrong. Interest rates are not set by any sort of market. They are set by the Federal Reserve and the national banks of other nations. Interest rates will be at whatever level suits the desires of the world's biggest banks. It would be nice if interest rates were independent of global banks and they would certainly be higher than they are now. Now they are artificially low so that savers don't really earn anything and banks have nearly unlimited amounts of nearly free money to speculate with. This is not sustainable. Low interest rates for banks is just making them borrow more money. the are way more in debt now than they were in 2008 when they crashed.
+4 # sharsand 2012-11-15 08:44
Why aren't Robert Reich and Paul Krugman working directly for the president. We would then have sound policies to bring us out of the Republican-crea ted greed-induced economy.

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