Our country appears to have avoided default on our debt, based on a deal that was cut Sunday night, and negotiations that will begin Monday morning. Of course, as I write this, there may well be another monkey wrench thrown into the process of compromise, as the Tea Party Republicans have been intransient and completely unwilling to compromise. President Obama and some Democrats, on the other hand, have been far willing to compromise putting everything sacred - Social Security, Medicare, educational programs - on the table while taking other matters, including tax increases on the wealthy, off the table. To swallow deep budget cuts without also looking at revenue increases seems misguided, at best, and perhaps even foolish. Further, to wait until the eleventh hour threatens the sense of security that our elderly, disabled, and others are entitled to. Eventually, this erodes confidence in government and weakens the fabric of civic participation.
The deal will require about $3 billion in deficit reductions, but no increase in revenue. It gives Republicans virtually everything they asked for in the beginning. Congressman Emanuel Cleaver (D-Mo), Chairman of the Congressional Black Caucus, described the deal as a "sugar coated Satan sandwich". Rep. Raul Grijalva (D-AZ), co-chair of the Congressional Progressive Caucus said this flawed deal "trades people's livelihoods for the votes for a few unappeasable right wing radicals". The entirely appropriate stern language, frankly, does not go far enough because it does not factor in the possibility that recession will continue (I know, some people think it is over, but those are the people who are still basking in the benefits of the Bush tax cuts), or become a double-dip recession. Indeed, if this debt deal exacerbates economic hard times, we'll be sipping on a side of strychnine with that sugar coated Satan sandwich Congressman Cleaver has described.
Double dip recession? How? Let's start with high unemployment rates that are likely to get higher when money is taken out of the economy. Let's add the millions of housing units that are empty, and the foreclosure crisis that has not yet been resolved. More than 28 percent of us have "underwater" mortgages, or mortgages higher than the value of a home. Many are considering walking away from those mortgages, exacerbating the housing crisis. Mix in the effect this months-long debate has had on our investment climate. Last week, the Dow Jones Industrial Average dropped by more than 2 percent in just one day. A skittish stock market doesn't exactly bode well for economic recovery. Nor does a weakened bond rating. Nor higher interest rates, which appear to be a possibility. Furthermore, economic growth in the last quarter was extremely sluggish, at just 1.3 percent. Consumer spending was up by only a tenth of a percentage point!
The unemployment situation is the most disturbing. Nearly a third of those who are out of work have been out of work for a full year. The average length of unemployment is now 40 weeks, or ten months! The French philosopher Albert Camus once wrote, "Without work all life is rotten". There are at least twenty-five million Americans leading "rotten" lives because they have no work. Many, also, have no hope. Yet the possibility of using stimulus to generate employment is not possible with the possibility of debt celling legislation that offers no flexibility for an employment downturn. Pass that sugar-coated Satan sandwich, and let me wash it down with a big dose of that strychnine. That's right, strychnine. Poison. Because this deal is poison for the economy and for most of the American people.
The possibilities of a double dip (or continuing) recession increase because there is little credit access. The banks took their bail-out money and ran. Small businesses and potential homeowners often can't get a loan even with pristine credit. The bail out money was meant for economic stimulus, but the banks played a bad game of three-card Monte with the American people. While our economy languishes, few in Congress have the moxie to stand up to the banks. Indeed, too many are in cahoots with them. How else can we possibly explain the sidelining of Elizabeth Warren to lead the new regulatory agency?
The debt-ceiling proposal is bad news. It is not even clear that it is "better than nothing". What it actually shows is that Tea Party Republicans are better at adhering to their principles and exerting their will than Democrats or the White House are. They deserve no credit for their unwillingness to compromise, because the legislative process is about compromise. But President Obama and some Democrats need to take heed of Tea Party tactics. Or drink that strychnine with the sugar-coated Satan sandwich.
Julianne Malveaux is a noted economist and President of Bennett College for Women. She is the author of Surviving and Thriving: 365 Facts in Black Economic History.
