Robert Kuttner

Both political parties are now committed to the idea that the road to recovery is paved with sacrifice. The Democrats want more in the way of tax increases on the rich, while the Republicans prefer spending cuts. But either way, the idea of a “grand bargain” that takes $4 trillion out of public budgets over a decade is a bad idea, says Robert Kuttner. In this talk, Kuttner explains why austerity doesn’t work, using examples from the real-time experiment in both Europe and America since the 2008 recession. In Europe, the economy is back in recession with unemployment is approaching 13 percent. In the U.S. the $270 billion down payment on a decade of budget reductions has already cut this year’s growth rate in half. Kuttner shows his audiences why we need to focus on jobs and recovery first, before trimming the national debt, and explains how austerity cripples economic recovery, despite what many politicians and journalists say.

Corporations can shed their debts by going through bankruptcy. And big banks have unloaded trillions of dollars of toxic debt onto the Federal Reserve and the taxpayers. But homeowners who have mortgages worth more than the value of the house can’t lighten their load through the bankruptcy system. Nor can college students. Nor can small countries. In this talk, Robert Kuttner explores the bizarre double standards of debt, and suggests ways to fix our broken system. The public debt gets all the publicity, but government has plenty of capacity to finance its debt, and at low interest rates. It is private debt that is strangling the recovery. If debt relief is good enough for big corporations and banks, argues Kuttner, it’s good enough for regular people.

In this talk, Kuttner argues that we are destroying the life chances of the next generation by saddling students and graduates (and dropouts) with what is now a trillion dollars of college debt. The system makes college success and life success more a matter of whether you come from an affluent family that pays the freight so that you can graduate debt free, than your own merit and determination. Kuttner offers concrete solutions to the ballooning student debt issue, such as a debt amnesty for people who’ve made ten years of payments and a college debt refinancing program at the government’s own low borrowing rate. My making these and other changes, Kuttner says, we could save students and debtors tens of billions of dollars a year, and ensuring that the next generation isn't straddled with life-altering debts.

Both political parties are outdoing each other to cut the budget deficit. It's true that deficits do need to come down over time, but a deep recession is not the time for austerity. That course only throws more people out of work. In World War II, we went much deeper into debt in order to defeat the Nazis. As a side effect, we invested massively in science and technology, recapitalized American industry, and re-employed American workers. All that investment finally ended the Great Depression, and powered the postwar boom. After the War, the nation grew its way out the debt. Today, we need the same scale of national commitment, without the war. Making the issue deficit-reduction, rather than robust recovery, puts the cart before the horse, and could prolong the recession. This is a time to invest in America's people and its competitiveness. Deficit reduction is much easier when you have a prosperous and growing economy.

China has a formula for displacing the United States as the world's economic leader, but it takes America to play along. The Chinese system is a hybrid that, in theory, is not supposed to work--one part aggressive, entrepreneurial capitalism, one part totalitarian communism. The Beijing regime offers American industry subsidies, docile and well trained workers. As a condition of entry, China demands that US-based companies share proprietary technology with Chinese partners. The whole system violates the trade norms of the World Trade Organization, but many American corporations have made their separate peace with China, and the US government is reluctant to play hardball to change the terms of engagement. In the short run, this co-dependency is good for corporate earnings. In the long run, it divorces the interests of American firms from the American economy. A more balanced strategy of trade with China is possible, but it will take more US leadership.

A recent article in the magazine Foreign Policy was titled, "American Decline: This Time it's Real." In the 1930s, democracies mired in depression were said to be no match for efficient dictatorships. We all remember the 1970s, when stagflation, high unemployment, and the rise of Japan led to proclamations of America's "imperial overstretch" and inevitable decline. Then came the abrupt end of communism, the Japanese financial collapse, and two decades of rising US prosperity and job-creation. Today, pessimists point to the rise of China, the looming national debt, persistent unemployment, partisan blockage, and the dwindling influence of Washington to control events on the Arab street. But don't count America out. We still out-innovate the rest of the world. There is no currency on deck to replace the U.S. dollar. Our problems are serious, but all have solutions. The question is whether we have the national resolve and political will make those solutions happen.

The impulse was a noble one. Trade more accountability for more federal aid, so that "failing schools" would turn into success stories Better yet, it was bipartisan, cosponsored by no less than George W. Bush and Ted Kennedy. But a decade later, the promise of NCLB is mired in high-stakes testing, excessive claims for charter and voucher schools, burdens on school districts of unfunded liabilities, and a "Race to the Top" pot of federal incentive money that has far more losers than winners. Poor kids are still being left behind, and the US still lags the performance of other nations on test scores. But if nothing else, the education wars have forced us to ask harder questions. Out of this tug of war over education policy, we may yet recognize models that help more kids succeed without scape-goating teachers or destroying classroom creativity.

For at least three generations, Americans have looked forward to passing along a better life to their children. But today's young adults face a double whammy. For more than two decades, the costs of making it into the middle class have been outstripping incomes--the costs of college, homeownership, decent health insurance and the expenses of raising kids--have soared while incomes have been nearly flat. Since 2007, on top of that trend we've had a severe jobs recession, again concentrated among the young. So is the Millennial Generation just fated to be a lost generation? Are young Americans victims of unlucky timing? Not at all--they are victims of bad politics and bad policies. Broadly shared postwar prosperity did not just happen. It was the result of deliberate measures during boom years that created ladders into the middle class. Those ladders can be re-created if we change our politics.

Give the Tea Party this--they are dead serious. The attack on government would cut public support for everything from preschool, college aid, health clinics, and help for the disabled to regulation of prudent banks, clean drinking water and safe food. A major assault on Social Security, Medicare, and Medicaid is next. Did Americans vote for this program when they cast ballots in November 2010 against the incumbent Democrats? Not according to the polls. These uses of government are broadly popular--and so are the progressive taxes needed to pay for them. So what is it about our politics that is creating an America that most Americans don't support? And what will it take to reclaim an effective democracy and a responsive government?