In the late 1920s, the French minister of war was one Andre Maginot, a World War I veteran with a handlebar mustache and a limp. M. Maginot, learning the lessons of the last war, had the idea that if France could just build an impregnable fortification on its eastern frontiers, Germany could never again invade it.
So between 1930 and 1940, at a cost of 3 billion francs, France constructed the unfortunate Maginot Line. When Hitler decided to invade, his Wermacht simply went around it, via Luxembourg and Belgium.
The Super-Committee created by the great deficit-reduction deal is the economic equivalent of a Maginot Line. It is required to defend and fortify the economy by coming up with at least $1.2 billion in budget cuts. If it fails to agree, then an automatic trigger mechanism kicks in, cutting $1.5 trillion.
But like the Maginot Line, the committee is pointed in the wrong direction. Its laborious construction is a waste and a diversion.
The real threat to the economy is coming from other quarters.
Financial markets are tanking, not because Congress is failing to cut deficits -- indeed, as part one of the deal Congress has already taken nearly a trillion dollars out of the ten-year budget.
No, the markets are swooning because the real economy is dead in the water. And now we are headed for a self-reinforcing downward spiral. As stocks fall, bank equity declines. Banks are less able to lend money.
Families, out trillions in the value of savings and retirement nest eggs, defer all but essential purchases.
Corporations lose customers and profits, and lay off workers, and then households spend less.
This is not rocket science, people.
In these circumstances, a committee charged with cutting government spending by $1.2 trillion is a Maginot Line. Government should be increasing spending, because everyone else is cutting back.
And the automatic trigger mechanism, which puts cuts on auto-pilot in case the committee comes to its senses, is like a Doomsday Machine.
Much of the press coverage has depicted the next battle as one over whether the Democrats on the Super-Committee will hold the line on Social Security and Medicare. And whether they will fight to make sure that the budget cutting includes tax hikes as well as spending cuts.
The six Democrats -- Xavier Becerra, Chris Van Hollen, and James Clyburn from the House, and Senators Max Baucus, Parry Murray, and John Kerry, despite occasional wobbling, are pretty strong on not sacrificing social insurance. They will very likely press for tax increases as part of the deal. There is not a hard-core deficit hawk in the group.
But with all due respect, this is a sideshow (albeit an important one).
The economy is heading for a depression. Any net budget cutting, with or without tax increases, will add to the downward pressure on purchasing power.
The newly appointed Democrats on the committee should declare that the deficit deal is as defunct as the Maginot Line. There should be tax increases on the wealthy, all right, but all that money and more should be poured into public investment.
The six Democrats should become a lobby for economic recovery rather than austerity.
President Obama should announce that the assumptions of the deal have been overtaken by events -- and leave the Republicans to champion the idea of pushing the economy from recession into depression.
Events are outflanking yesterday's grand bargain, which is as useless and dangerous to our security as a Maginot Line. But will any of our leaders notice in time?
You need to be logged in to comment.
(If there's one thing we know about comment trolls, it's that they're lazy)