Economist Robert Reich says jobs, wages and growth are the real crisis, and Washington needs to focus on improving the economy and stop worrying about deficits.
"No business in its right mind would make the investment in additional capacity if there are no customers," Reich said in a speech at Dartmouth College. "That's the vicious cycle we're in."
“There’s no lack of ideas,” says Reich. “There’s a lack of political will, which is made more difficult by the deal that was just signed into law.”
Speaking to CBS News, Reich said the budget deficit is important over the long-term, “but now you need to take action to spur growth.”
Reich suggested exempting the first $20,000 of income from payroll taxes for two years, amending the bankruptcy laws so people can actually declare bankruptcy on their primary residence and have more bargaining leverage with lenders or expand earned income tax credit, extending the earned income credit, giving tax benefits to employers who hire more workers and increasing financing for infrastructure projects.
"Many people who understand the economy now understand something very
fundamental, and that is the new budget deal has tied the hands of the
government, making it more difficult for the government to respond to this
crisis in aggregate demand, the fact that people are not spending enough,
with additional boosts to the economy."
Reuters reports that consumer spending dropped in June for the first time in nearly two years and incomes barely rose, signs the economy lacked momentum as the second quarter drew to a close.
Consumer spending slipped 0.2 percent, the first decline since September 2009, after edging up 0.1 percent in May. Adjusted for inflation, spending was flat after a 0.1 percent decline.
Incomes rose just 0.1 percent.
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