Americans, listening to the intensifying debate about the fiscal showdown in Washington, must think they’ve entered an “Alice in Wonderland” world. The lame duck Congress only returns to Washington this week, but already the lame is drowning out the logical.

Americans have just voted to reelect the president with clear priorities. They want Washington to get to work creating jobs and economic growth. They expect the president to raise taxes on the richest two percent in order to invest in areas vital to our future, as he pledged repeatedly across the country. They didn’t hear much about the so-called “fiscal cliff” in the election campaign, but their opinions on what is acceptable in any grand bargain are very clear.

In the election eve poll done by the Democracy Corps for the Campaign for America’s Future (disclosure: I serve on the board of the Campaign’s sister institution, the Institute for America’s Future), voters were asked what would be unacceptable in a large deal to reduce deficits. Seventy-nine percent found cuts to Medicare benefits unacceptable; 62 percent found cuts to Social Security unacceptable. And a stunning three in four found across the board domestic cuts that didn’t protect programs for “infants, poor children, schools and college aid” unacceptable.

It’s hard for voters’ common sense to get a hearing inside Washington’s beltway. Instead, the multi-million dollar campaign funded by Wall Street billionaire Pete Peterson to “Fix the Debt” has enlisted CEOs and the noisome former co-chairs of the president’s deficit commission, Alan Simpson and Erskine Bowles, to raise hysteria about deficits and debt. Republicans are arguing yet again for cutting Social Security and Medicare in exchange for lowering tax rates on the wealthy, while promising that closing loopholes would raise more revenue. Voters just rejected Mitt Romney when he tried to peddle a version of this junk arithmetic.

Almost everything about the current debate in true “Alice in Wonderland” fashion “is upside down and inside out.”

All the talk is about reducing deficits, but America doesn’t have a short-term deficit problem. It has a jobs and growth problem, because it is still struggling to recover from the worst economic calamity since the Great Depression. Government deficits are essential to sustain growth, while families and businesses recover. As Great Britain and the European Union have shown, inflicting austerity, spending cuts and middle income tax hikes on a weak economy will only drive the economy back into recession. And ironically, make our debts harder to pay, as the economy shrinks and unemployment, poverty and misery rise. The first and necessary step to address the deficit is to put people back to work.

To avoid scheduled cuts in spending and tax hikes, the president and House Speaker John Boehner (R-Ohio) have resuscitated their wrong-headed “grand bargain” discussions from a year ago. These assume that lowering the long-term projections of rising deficits and debt will help the economy, and that cutting entitlements like Medicare, Medicaid and Social Security are the way to do that.

But the biggest problem for the health of the U.S. economy — and therefore the health of the federal budget — is that we don’t have a sound foundation for sustainable growth. The old economy was built on bubbles and debt and we can’t go back there. Worse, it didn’t work for most Americans in any case. The middle class has been struggling, while the richest one percent captured nearly two-thirds of the rewards of growth before the Great Recession.

We should be focused on building a new foundation: long-term investment to rebuild America, with a strategy to revive manufacturing and capture a lead in the green industrial revolution that is sweeping the world; investments vital to making the United States a leader in public education once more, from universal pre-K to affordable college; curbs on CEO plunder and empowering of workers so that the benefits of growth are widely shared; reining in Wall Street so its excesses don’t bring down the economy once more. And of course, continuing to press reforms of our broken health-care system, the projected rising costs of which account for all of the scary long-term deficit projections. (If the United States spent per capita what other industrialized countries spend on health care, we’d be projecting surpluses as far as the eye can see.)

With Gilded Age inequality, Boehner’s grand bargain begins with lowering top rates on the wealthy and corporations. With growing insecurity for the elderly, Medicare, Medicaid and Social Security are targeted for cuts. With mass unemployment and declining wages, Washington is talking about inflicting austerity that can only cost jobs.

At a time when the country desperately needs Congress to have the courage to take on the powerful entrenched interests that now threaten our future — big oil, King Coal, Big Pharma, Wall Street, the military-industrial complex, the medical complex — politicians are strutting about their courage in cutting programs for the elderly, the disabled, the ill and the vulnerable.

The voters are clear about their priorities. But so too are the CEOs and the powerful special interests at risk. The question, as Humpty Dumpty asked, is “which is to be the master.”