What's the Big Idea?
If you're stuck in the middle of an economic downturn, Big Think's chief economist Daniel Altman says in his latest video lesson, "it's not a good time to put on the brakes with fiscal austerity, raising taxes to raise more money, and cutting spending to tighten the government's belt."
The government did not opt for austerity during President Obama's first administration, but spending cuts and tax increases are right now back on the table as both Republicans and Democrats alike hope to avert far more dramatic measures that would be triggered by going over the so-called fiscal cliff.
According to Altman, the current Congress should not simply "kick the can down the road and let the next government deal with it." However, "we don't have to do it in a sharp shocking way today," Altman says. "We have a few years of runway to do it."
Watch the video here:
What's the Significance?
Altman says that austerity that could slow the economic recovery down don't make sense "if you can borrow at low interest rates," noting that the debt service that we pay right now are at a very low rate. "In fact," Altman says, rates were "much higher during the Reagan and first Bush Administrations."
So as we think about how we're going to eventually close a big debt gap, Altman says we need to think beyond two-year election cycles.
"It's tempting to think that way," Altman says, because
people in this government are more concerned about re-election than what might happen ten or 20 years from now, but we can use the time that we have to phase in these changes so that there aren’t abrupt dislocations in our economy. A responsible Congress would act now setting a plan that would phase in these changes over the next five to ten years.
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