Fragile economic recovery at risk due to midterm election politics

Rep. John Boehner (R-OH) and other Republican leaders are blocking any new attempts at stimulus. AP Photo

The most recent economic reports reveal some troubling signs for the recovery effort.  Unemployment is still at over 9.7%.  Over the last month more Americans have filed for jobless benefits, the housing market is trending downward, and consumer confidence is starting to suffer.  Under the best case scenario, the economy has hit a speed bump and we are in danger of suffering from another recession.  Under the worst case scenario, we are in serious trouble on the edge of a more serious economic free-fall like a depression.

It is at this time that the country needs some kind of preventive measures from the federal government.  It is much more costly to avoid an economic disaster than to try to react to one.  Despite this reality, politicians seem perfectly content to sit back and watch as the country suffers.

There are two varying explanations for the current situation.  Fiscal conservatives argue that the government has spent too much money.  They say the stimulus was ineffective in creating jobs and lower taxes are needed to create real growth.  Fiscal liberals argue the stimulus did stave off a depression, temporarily, and create some jobs.  They point to better GDP numbers and a graph showing job growth under the Obama administration, as opposed to job loss under President Bush.  For liberals, the problem is not too much spending, but too little spending.  They argue the stimulus was actually made up of mostly tax breaks, and that more government spending is needed to create more jobs in the absence of private sector spending.

Regardless of which argument one agrees with most everyone agrees something needs to be done.  Either Congress should pass more tax credits, which immediately take effect, to generate growth, or they should pass a new stimulus package.  Both options, however, have virtually zero chance of actually happening.  Republicans are absolutely opposed to any new spending and they have the ability to stop almost any legislation in the Senate with their filibuster.  Democrats are not about to respond to the crisis by passing more tax cuts for wealthy Americans and corporations, which is the heart of the Republican proposal.  So called "Blue Dog" Democrats hold the power as the swing vote, and they are siding with Republicans against any new spending.

Both parties are more concerned about the 2010 midterm elections than the practical economics which affect American lives.  The more guilty party is likely Republicans, who have filibustered an extension of jobless benefits multiple times despite all logic to the contrary.  Jobless benefits are not true welfare, as workers pay for such benefits when they are working,  An employee must be laid off, not fired, to earn the benefits, and they also must prove that they are actively seeking a job.  The unemployment checks they receive are very likely to be spent immediately, helping create economic growth.  Despite all this, election year politics are keeping an extension from being passed.  Republicans are now saying the extensions must be paid for (ignoring the fact that the Iraq War and Medicare Part D were passed under President Bush without being paid for). 

If Democrats can not pass an extension of jobless benefits, it is very doubtful they will be able to pass anything else before the midterms.  No one knows who will benefit politically from another economic downturn.  The most likely victim will be Democrats since they hold the most power in Washington right now.  Republicans may also suffer if Americans grow frustrated with their obstructionism.  Regardless of who gets hurt politically, it seems fairly clear that the whole country will suffer economically.