President Obama used his news conference Monday to send the message that he intends to stand firm against the kind of budget blackmail that has become the favored weapon of congressional Republicans. Gradually, Obama and fellow Democrats are finding that it is not just possible, but also necessary for the good of the country, to challenge the bully-boy tactics on the debt ceiling and the budget with which the GOP has paralyzed the government.
There are other signs that the straitjacket of Republican orthodoxy is loosening. Last week Gov. Jerry Brown of California announced that, after years of massive budget deficits and the unconscionable deterioration of the stateís schools, the California budget was in the black. How did this happen? After all, California has been strapped by the tightest straitjacket of all, forced to obtain a supermajority in the Legislature or to win voter approval in order to raise taxes.
Brown decided to put the question to the voters, and the voters chose to raise taxes on wealthy Californians. Now Californiaís economy is starting to rebound, and higher taxes are bringing in revenues allowing the state at long last to balance the budget. One of Brownís aims now is to rebuild financing for the University of California system and the state universities, which had undergone damaging draconian cuts.
It turns out that balanced budgets and economic growth can both be achieved while beginning to redress the tax inequities that have been the consequence of the anti-tax ideology that has ruled the day, particularly in California. California, which sometimes serves as the leading edge of change in the nation, pioneered the age of austerity when it passed Proposition 13, putting in place the fiscal straitjacket that has turned one of the nationís best school systems into one of the worst. Now California may be pioneering the kind of common-sense budgeting that is founded on the principle that if we are to undertake important public responsibilities, such as education and health care, we have to be willing to pay for them.
Another harbinger of change appears to be showing itself in Japan, as Paul Krugman described in a recent column. For many years Japan has been trapped by its unwillingness to take action bold enough to break out of the stagnation and deflation that had crippled its economy. But lately, according to Krugman, policymakers have harnessed the beneficial effects of inflation to check deflation and boost the economy. Fear of taking bold action had consigned Japan to a pattern of doing just too little to rescue the Japanese economy, according to Krugmanís analysis.
Europe has provided another test case. The Conservative government of British Prime Minister David Cameron initiated a policy of severe spending cuts to rein in deficits, and the result has been a return to recession. The test case now has shown some demonstrated results. The European Union is suffering continuing stagnation for the same reason.
In the United States an anti-austerity policy would incorporate reasonable budget cuts, especially in defense, combined with a continuing effort to institute fairness in taxation by closing loopholes and special privileges accorded to the wealthy and lowering the income levels subject to higher rates. The federal government would also establish an infrastructure bank to facilitate investment in public projects and would help states rehire tens of thousands of teachers and other public workers.
The federal government cannot reverse the drift toward European stagnation if it submits to Republican budget blackmail. Obama needs to make the case that an active federal government and targeted spending, combined with reforms that contain the costs of health care, are what is needed to get the economy moving. That is the case he made during the election campaign, and his refusal to entertain debate about the debt ceiling is a sign that he means what he says.
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