Panic over a looming fiscal crisis plays directly into the Republicans' hands.
Image from Flickr via Rob Shenk
By Robert Reich
By arrangement with Robert Reich
Why is the White House trying to scare average people about the consequences of the “fiscal cliff?”
If the President’s strategy is to hold his ground and demand from Republicans tax increases on the wealthy, presumably his strongest bargaining position would be to allow the Bush tax cuts to expire on schedule come January – causing taxes to rise automatically, especially on the wealthy.
So you’d think part of that strategy would be reassure the rest of the public that the fiscal cliff isn’t so bad or so steep, and that at the start of January Democrats will introduce in Congress a middle-class tax cut whose effect is to prevent taxes from rising for most people (thereby forcing Republicans to vote for a tax cut for the middle class or hold it hostage to a tax cut for the wealthy as well).
But today (Monday) the White House’s Council of Economic Advisers issued a report today warning that if Congress allows the Bush tax cuts to expire January 1and the Alternative Minimum Tax to kick in, the middle class will face sharply-rising taxes.
The result, says the Council of Economic Advisers, could slow consumer spending by 1.7 percent next year, and slow overall economic growth by 1.4 percent. The loss of $200 billion in consumer spending is just about what American families spent on all the new cars and trucks sold in the U.S. in the last year, according to the report. About $36 billion less would be spent for housing and utilities, $32 billion less for healthcare, and $26 billion less for groceries and at restaurants.
This kind of fear-mongering plays into Republican hands.
Robert B. Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.
Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations: Preparing Ourselves for 21st Century Capitalism which has been translated into 22 languages; and his newest, an e-book, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.