By Teresa Welsh |
While it may be good politics, there is no economic imperative to balance the budget. But there is an economic imperative to put our fiscal house in order because our large deficits and growing debt are placing a drag on the economy and holding back job creation. Unemployment for young Americans 18-29 is still in double digits at 13.1 percent.
The inability of Congress to come to an agreement on future tax and spending policy and how to reduce our long-term deficits creates uncertainty that trickles down to all parts of the economy from large corporations to family households. Partisan gridlock robs all of us of the confidence to plan, spend and invest—precisely what we need to be doing for our economy to fully recover. The result is that consumers are unsure what they can spend, which leads businesses unsure about demand, which ultimately means they hold back on hiring more workers.
Many indicators suggest the economy is in a good place. The Dow Jones hit a record high last week, corporate profits are higher than ever and Apple has grown to become one of the world's most valuable companies. On top of that, corporations have at least $1.7 trillion in cash reserves. Yet too few are hiring and unemployment is still too high.
So what's the problem? Is it a lack of government stimulus? Most likely not. Between the American Recovery and Reinvestment Act and the Federal Reserve's monetary policy, we've already pumped close to $4 trillion into the economy. If the problem is not corporate balance sheets, the stock market or government spending, that leaves only a few things. A lack of economic certainty and confidence, while not very easy to measure, is what the economy is missing and what a budget deal can provide.
If we want to unlock the full power of the economy, we need to put in place a plan that reduces our deficits over the long-term. Congress and the president should replace the sequester with a generationally balanced plan. A plan that prioritizes high-return investments, like education, research and infrastructure; tackles entitlements and back door spending through the tax code; and reduces our projected deficits by at least $2.4 trillion over the next 10 years. Until that is done, uncertainty will continue to hold back growth, and future generations will end up paying the price.
About Ryan Schoenike Executive Director of the Can Kicks Back
Matthew Mitchell Senior Research Fellow at the Mercatus Center at George Mason University
Stan Veuger Research Fellow at the American Enterprise Institute
Roger Williams Republican Representative From Texas
Scott Lilly Senior Fellow at the Center for American Progress
Isabel Sawhill Senior Fellow in Economic Studies at the Brookings Institution