K-12 Tax & Spending Climate: Clueless in Washington

The Economist:

IT WAS never reasonable to expect that Barack Obama's budget proposal, delivered to Congress on February 1st, would do much to bring down America's vast deficit in the near term. True, the economy has returned to growth. But a big part of that consists of restocking after a savage downturn that has left inventories depleted. Consumers are still struggling with the collapse in the values of their homes and other assets. And unemployment stands at a stubborn 10%: the administration forecasts see only a fractional fall in joblessness this year.

Unlike other rich countries, America lacks the "automatic stabilisers" that kick in during times of recession to help boost demand. Unemployment benefit is extremely limited. Most states are legally barred from running deficits, so when their revenues fall in times of recession they make painful cuts, firing workers and ending programmes--thus exacerbating the downturn rather than offsetting it. Only the federal government can fill the demand gap, and if it is too parsimonious and the recession returns, the deficit would get much worse.

Posted by Jim Zellmer at February 10, 2010 1:38 AM
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