The case for a ‘supercommittee’ on growth
Forget who is on the “supercommittee.” Consider instead what it does.
The default in Washington is that nothing gets done, and it doesn’t get done slowly. The supercommittee takes one issue -- spending cuts -- and flips the default. Now the default is that something gets done quickly, either because the committee votes out a plan that can’t be filibustered or amended or because the committee fails and the trigger mechanism begins making automatic cuts.
But do we need spending cuts right this second? Well, no. As investor Bill Gross writes, what we need is action to address the jobs crisis right this second. Spending cuts can wait until after that. In fact, they should wait until after that. If we start cutting spending too soon, we’ll badly hurt the recovery. But if we don’t do anything to address the jobs crisis anytime soon, we may not have a recovery, and we’ll have missed an extraordinary economic opportunity.
The crisis in Europe, the disaster in Japan, the concerns about China, and the clear faltering of the global recovery have sent investors rushing to buy the one asset they still consider safe: Treasury debt. They have become such eager customers for Treasury debt that the real rate has turned negative. That is to say, the market will actually pay us to issue 5, 7, or 10-year debt and take their money. This isn’t just free money. It’s better than free money. If a corporation was being offered these rates and refused to take them, the board of directors would fire the CEO.
This is money that could be used for a massive payroll tax cut. It’s money that could be used to overhaul our nation’s deteriorating infrastructure. It’s money that could help state and local governments stop firing people. It’s money that could go towards medical research. To believe this money isn’t a good deal, you would have to believe that these activities have a negative real rate of return. At a time of massive joblessness, when factories are idle and roads are crumbling, is simply not credible.
But we don’t have a supercommittee to help us quickly figure out and pass a plan of action to take advantage of this extremely unusual opportunity to speed our recovery and invest in our future. Instead, we have a supercommittee dedicated to helping us quickly figure out how to cut spending and we’re going to leave the recovery and any potential investments to Washington’s slow process of doing nothing. We’ve got it backwards.
Which is why I’m rather taken with Rep. John Larson’s idea to create a supercommittee for jobs. I would slightly dissent from his proposal in order to orient the supercommittee around growth, both short-term and long-term, but the basic idea is the same. The trigger should be that the debt-reduction committee’s proposals can’t pass until the growth-committee’s proposals have seen a vote in Congress.
Will it happen? Almost certainly not. But that’s not because it’s a bad idea. It’s because there’s no powerful actor in the political system willing to fight for it. The Obama administration could have insisted that the supercommittee produce recommendations on growth and jobs. It didn’t. Nancy Pelosi and Harry Reid could have demanded the same thing. They didn’t. John Boehner and Mitch McConnell could have said that Republicans won an election in 2010 by promising to focus on jobs, and so that would have to be part of the supercommittee’s efforts, too. They didn’t.
Neither Democrats nor Republicans are willing to insist that the deals they strike include actions on jobs and growth, and so they don’t. Conversely, Republicans are willing to insist that the deals they strike include action on deficit reduction, and so they do. The result is that the political system is focused on deficit reduction and not on jobs, and so rather than taking a historic opportunity to invest in our recovery and our future, they’re now seeing if they can avoid the historic mistake of slashing spending during a weak recovery. Your political system in action, folks.