POLITICS - Crisis Averted, BUT.......

"Raise the Roof: Debt Crisis Averted, But Debate Far From Over" PBS Newshour 8/2/2011

Excerpt from transcript

JEFFREY BROWN (Newshour): Robert Reich, you first. What is the -- what is the principal economic problem of the country now? We have -- we have spent weeks and weeks talking about debt. The president, we just heard, says now it's time to get back to talking about employment.

What's the principal problem?

ROBERT REICH, former U.S. Labor secretary: Well, the principal problem is not debt. The principal problem is jobs and lack of growth.

Now, long term -- that is, 10 years from now or seven years from now -- yes, if we don't do anything about our mounting deficits, there will be a severe deficit and debt problem. I think Professor Taylor is absolutely right. The country does need to focus on that.

But, in the short term, there is no question that the number-one priority is to get jobs back and to stimulate the economy, to boost aggregate demand. If consumers, again -- and I want to -- I want to kind of explore this because I'm interested in Professor Taylor's response.

If you have such a shortfall in demand, if consumers, who comprise 70 percent of the economy, are under a huge debt, they're scared of losing their jobs, their houses have declined 30 percent, 33 percent from what they were in 2006, they are not going to spend. They are not spending. There has been a huge drop in consumer spending.

Businesses are not going to create jobs without customers out there to buy the goods and services that consumers -- that businesses can provide. And so government, over the last eight recessions, if you count the Great Depression and the spending on World War II -- that's nine instances -- government fiscal policy to stimulate the economy in the short term with jobs programs, a new, for example, WPA, Civilian Conservation Corps, all kinds of things that actually generate directly or indirectly jobs, is the only thing we have to stimulate demand right now.

"Debt Bill Is Signed, Ending a Fractious Battle" by JENNIFER STEINHAUER, New York Times 8/2/2011

Excerpt

The Senate voted Tuesday to raise the government’s debt ceiling and cut trillions of dollars from its spending, concluding a long and fractious partisan battle just hours before the government’s borrowing authority was set to run out.

The bill, which passed 74 to 26, was immediately signed by President Obama, who took a final shot at his Republican opposition for what he called a manufactured — and avoidable — crisis. “Voters may have chosen divided government,” he said, “but they sure didn’t vote for dysfunctional government.”

Voters will render their verdicts on the merits of divided government next year, but its impact is now abundantly clear: the agenda of the 112th Congress will be dominated by continuous fighting over spending priorities and regulation, with a high bar for big debates on foreign policy and other domestic issues coming to the fore.

“When was the last time anybody said anything about Libya?” said Representative Phil Gingrey, a Republican from Georgia who was first elected in 2002. “This is the way it is going to be until the election.”

In the seven months since the change of power in the House, the Washington discourse has shifted almost completely from the decades-long battle between both parties over how to allocate government resources to jousting over the moral high ground on imposing austerity, with seemingly none of the political or practical motivations that have historically driven legislation.