Robert Reich Wonders How the Politicians Can Ignore the Big Issues

From Robert Reich's blog:

Why isn’t Washington responding?

The world’s third largest economy suffers a giant earthquake, tsunami, and radiation dangers. A civil war in Libya and tumult in the Middle East cause crude-oil prices to climb. Poor harvests around the world make food prices soar.

All this means higher prices. American consumers, still reeling from job losses and wage cuts, will be hit hard. (Wholesale food prices surged almost 4 percent in February, the largest upward spike in more than a quarter century.)

Even before these global shocks the U.S. recovery was fragile. Consumer confidence is at a five-month low. Housing prices continue to drop. More than 14 million Americans remain jobless, and the ratio of employed to our total population is at an almost unprecedented low.

So you might think our elected representatives would want to avoid a repeat of what happened the second half of 2010 when the fragile recovery began tanking. They’d certainly want to prevent a double-dip recession.

You’d think they’d be creating booster rockets to counter these recessionary forces – freeing up more spending, exempting the first $20,000 of income from payroll taxes, imposing a moratorium on bank foreclosures, giving Americans another six months to file their income taxes, lending states whatever money they need to prevent more of their own budget cuts.

Think again.

Amazingly, the big debate in Washington is about how whether to cut $10 billion or $61 billion from the federal budget between now and September 30.

There is more. Go read the full post.

Here's Reich's conclusion:

The U.S. economy is flirting with another dip at a time when the global economy is teetering and most Americans are still in economic trouble. But nothing is being done in our nation’s capital because knaves and fools are in charge.

It is an unmitigated tragedy that the politicians are fiddling while Rome burns. But it isn't an unprecedented tragedy. This is a repeat of the 1937 "recession within the Great Depression" when politicians pulled the same trick of focusing on deficits and debts and grandstanding about the morality of "living within your budget".

This is the 1937 world that current politicians want to re-create. From Wikipedia:

In June 1937, some of Roosevelt's advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill. The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster.

Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels. Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors, hourly earnings continued to rise throughout the recession, which partly compensated for the reduction in the number of hours worked. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production.

The lunatics are in charge of the asylum!