Federal deficits pose a long-term problem that requires an urgent response. A joint congressional committee, co-chaired by Washington Sen. Patty Murray, will soon begin work on a start, paring deficits by at least $1.5 trillion over the next decade. Some progress is assured: Automatic cuts kick in if the panel fails in its task.
Meanwhile, unemployment and a moribund economy pose a problem that’s both urgent and immediate. U.S. job growth was virtually zero in July. Economists representing a wide ideological range agree that failure to produce more jobs, now, threatens to throw the nation into another recession, which will only worsen the long-term deficit challenge.
President Obama is expected to propose several initiatives to spark job growth in a speech to Congress on Thursday. Ones that are targeted to produce jobs quickly, like tax credits to small businesses for hiring workers and spending on road and other construction projects that will put people to work (and have long-term benefits for commerce), deserve swift passage.
That means doing two things seemingly at odds with each other: getting additional short-term spending approved just as work is starting on reducing long-term spending.
Counter-intuitive as that seems, it’s the best solution for both problems.
The economy needs to add around 250,000 jobs a month to make a dent in the unemployment rate. But job growth, already slow, has stalled even more in recent months, essentially hitting zero in July. Wages have long been stagnant for those who do have a job, holding back consumer spending — which accounts for about 70 percent of economic growth.
Construction spending is half of what economists say represents a healthy level, and it fell across the board in July.
The negative signs are ominous. Another round of political bickering like we witnessed during the debt-ceiling fiasco could send unemployment into a deeper spiral.
Effective action to spur hiring, however, would make long-term deficit reduction easier. Economic growth is the quickest and most effective way to narrow the gap between spending and revenue.
That said, tough choices must be made to ensure an economic rebound doesn’t simply lead to another round of increased spending. The joint committee should set its sights beyond $1.5 trillion in spending reductions. Doing so will require Democrats and Republicans to show courage most have so far failed to muster in tackling politically sensitive issues, including entitlements, military spending and the tax code.
Solutions to the deficit problem aren’t easy, but neither are they impossible. As long as the economy breaks out of this malaise, that is.