The Simple Truth: You Can’t Have Growth and Austerity at Once

We're two weeks away from yet another crop of austerity measures that make the sorts of ideas laid out in President Obama's State of the Union simply impossible.

By Imara Jones Feb 13, 2013

The president’s State of the Union speech opened last night with an unambiguous [call for a renewed focus on economic growth]( and new measures to reinvigorate the middle class. To get the economy going again, he asked Congress to adopt his public sector and infrastructure jobs proposal; increase the minimum wage from $7.25 to $9; and ensure the affordability of early childhood education for all families. But within a two-minute timeframe, the president pivoted from these less than bold, but still noteworthy ideas on economic opportunity and launched into the reality of looming budget austerity. The truth is, unless imminent fiscal cuts are avoided, Obama’s fractured speech–one part growth and the other part austerity–may turn out to be a defining metaphor for his second term. The bottom line remains that there is no way to have both growth and austerity at the same time. We have to make a choice. Right now, through a mutual set of choices made by the Congress and the president, [the country is headed for austerity]( The first tranche in over a trillion dollars in automatic spending cuts is just a little over two weeks away. If implemented, these rollbacks–or sequestration, as they are formally known–will extend and deepen the economic crisis in communities of color. The nature of the president’s economic plans advocated last night make the point. [As I’ve laid out before](, government job cuts are among the leading reasons that our economy remains in trouble. If Obama’s program to put most of the laid off teachers, firefighters and police officers back to work were implemented, our economy would largely return to health–and the problem of black unemployment specifically would largely fade. As the Berkeley Center for Labor Research details in a report, "to a large degree, the jobs crisis amongst blacks is the jobs crisis in state and local government." The same is true for the president’s push to repair America’s crumbling transportation network. Over two million construction jobs were lost during the recession. Massive investments in infrastructure would both lay the foundation for future economic growth and put the disproportionately young black and Latino men in the construction industry back to work. Together these proposals would cost close to $150 billion a year. But here’s where the president’s goals for economic growth collide with the reality of the moment. At precisely the time that we need to spend more, we’re spending a lot less. As the Center for Budget and Policy Priorities (CBPP) points out, with the $1.2 trillion in cuts and budget caps the president agreed to in 2011, by 2017 we’ll be spending less–as a percentage of GDP–on the portion of the budget that funds economic opportunity for the working poor and people of color than at [any point in 50 years]( At these reduced levels of funding, there’s no way that the president’s goals can be met. Take his proposal on early childhood education, one of the most exciting ideas in last night’s speech. According to the CBPP, unless states pick up the tab, with sequestration there won’t even be sufficient resources to fund existing Head Start and childcare assistance commitments, let alone make new investments. The same is true for Pell Grants, Section 8 housing and Veterans benefits. The president’s push for a $1.75 raise in the minimum wage would of course be accomplished outside of the federal budget. But according to Political Economy Research Institute’s Jeanette Wicks-Lim, [it should be more like a $5 rais]( Regardless of the amount of increase, the wage hike can’t have the desired impact of lifting living standards without federal housing, food, education, and transportation support to match. These are all on the chopping block with sequestration. The thought at both ends of Pennsylvania Avenue in 2011 was that by enshrining such an absurdity into law, common sense solutions to unravel the nation’s longterm debt problem would arise. Under more normal circumstances, they might have. But these are not normal times in Washington. A faction of the congressional Republican party–those in front of the president during his speech last night–believe that most current government functions should fade away, especially those education, housing, transportation and health programs implemented to give historically marginalized Americans a shot. [As I have writte](, this set of Republicans argues that the New Deal and the Great Society, which actually made the United States fairer, instead sparked its decline with too many taxes funding too much largesse. [The facts are not on their side]( The United States is actually the least taxed developed country on the planet. It funds its government activities, as a percentage of its economy, at about the same rate as Mexico. This means that we’re underinvesting and unable to remain competitive, and our declining living standards show it. Additionally, [according to the Congressional Research Service](, there’s not one shred of evidence that suggests that slashing taxes boosts economic growth. The reality is that if we want to have a first world economy we’re going to have to start to pay for it. The truth of our current crisis means we need to spend more, not less. But we can’t start that conversation without first having a successful resolution to sequestration and the remaining budget debates set for this year. That’s why the State of the Union address came across as off-beat at times. Rather than a clear, sustained argument against sequestration and the other impending financial crises, we got a speech in which the fundamental themes of the simultaneous need for growth and austerity cancelled each other out. One wonders whether it was a missed opportunity that left allies and opponents alike potentially confused. In front of the largest audience that he’s likely to have for the remainder of this year, the president essentially embodied the different sides of our national dispute, rather than sketching out a way for us to untangle it.