Washington is focusing on the wrong problem

Further evidence that Congress and the president should rethink their focus on immediate deficit reduction: First-quarter growth slowed to an anemic 1.8 percent. A Ezra Klein noted, that would be poor growth in normal times, “In a recovery, it’s downright terrible.”

Ordinary recoveries feature strong growth as pent-up demand is finally satisfied. And that’s what we need to start to get back to normal. Klein again:

What we need right now is something different from, and faster than, normal growth. What we need right now is catch-up growth. We’ve spent years underperforming economically. We’re 7 million jobs below where we were when the recession began. Like a man who has been starved for a year, getting back to normal won’t cut it. We need to get back to better than normal. We need to be above trend.

That’s exactly right. Some of the things holding the economy back are unavoidable, and probably short-term: a jump in oil prices related to Mideast instability, bad weather and a temporary slow down in defense spending that I speculate may have been related to the gamesmanship on the budget. But some of the problems are of our own making. The federal government is cutting billions of dollars in spending. States and localities are laying off workers in the face of restricted budgets (14,000 public sector jobs lost in March alone).

Congress and the president should be focused like lasers on the economy. Instead, all of the talk is about the deficit (when it isn’t about the president’s birth certificate, that is). The deficit is a problem, and the nation is on an unsustainable long-term course – but health care inflation is what is driving us toward fiscal ruin. Any deficit proposal that fails to deal with that should not be taken seriously. That, however, is a sticky, long-term problem that doesn’t have any simple solutions. The Republican proposal is to do nothing except shift costs onto those who can least afford it. President Obama is at least trying to make sure that Medicare spends limited resources wisely and effectively by studying what treatments actually are effective.

But, again, the far more immediate concern in Washington ought to be the economy, not the deficit. Get the economy moving, get Americans back to work, and tax revenue will automatically increase. That’s the easiest way to immediately lower the deficit, after all.

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