The American economy is growing every quarter and long-term forecasts are cautiously upbeat. Economists admit that the underlying fundamentals of the economy ought to be better, but generally believe we are no longer threatened by impending freefall. It makes one wonder how much stronger the economy might be… if not for austerity.
Last week, Bloomberg reported that economists and business leaders are turning up their forecasts for 2013. Across the board from housing starts to consumer spending, from energy production to job creation, the American economy is growing. JPMorgan Chase & Co. increased its growth forecast for the first quarter of 2013 to 3.3 percent. Morgan Stanley increased its own projection to 3 percent. A Bloomberg survey of dozens of economists also revealed 3 percent expected growth.
The primary factors holding the economy back are austerity budget measures from Washington. President Obama, in a move to cut the budget deficit, allowed temporary income and payroll tax decreases to expire. Congressional Republicans, singularly fixated on deficit reduction as their only policy goal, pushed for much more dramatic cuts to spending.
The politicians said that these austerity measures would be good for the country, but the experts now believe budget cuts are holding us back. The sequester alone is expected to cut 0.75 percentage points from growth figures for the year. In exchange for cutting $85 billion out of the 2013 budget, Congress likely hacked another $120 billion out of economic growth.
If only there were no fiscal austerity.
It is important to address some of the failings of this economy. We import too much and far too many Americans live in debt. College is increasingly unaffordable and healthcare costs are too high. Our politicians ignored the value of science and math for decades and now, to make up for the delay, they are decreasing support to the arts and humanities. Stealing from Peter to pay Paul is not the way to run an education program.
These are enormous challenges and difficult political situations, but they do not have to be permanent. Each of the obstacles listed above is something that can be corrected by good policy.
Good policy can curb imports and boost domestic production. Good policy can cut college costs and free millions of young graduates to take risks in the world’s most diverse economy.
Good policy can restore funding to essential arts and humanities while also expanding support for the science and math. Since when were American students not supposed to be the best at everything?
Good policy can cut medical and healthcare costs. Did you know that legislation specifically blocks the government from negotiating lower prescription prices? Did you know that American consumers, who are more than welcome to buy imports for anything else, are barred from buying cheaper drugs overseas?
This country has a budget problem. Yes, the government runs too large a deficit, but there are many ways to close a deficit. Investing in economic growth today will shrink the deficit tomorrow. Investing in children today will pay off ten years down the line. The United States invested in education, science, research and development in the 1950s and within twenty years a dozen people had walked on the Moon.
This country can be, and should be, an economic titan once again. All it needs is good policy and good leadership. The last thing it needs is to reduce the deficit at all costs.