The voters have spoken: they put the Republicans in control of the House in a year where the economy and deficits ruled debates. The GOP has checked President Barack Obama’s power only two years after his joyous victory. Motivated by high unemployment and a ballooning deficit, the public is more determined than ever to get this economy moving with or without Obama.
But Americans need to realize that whatever issue they blame for today’s troubled economy, many economists will agree that Congress needs to do more to help stimulate the slowing recovery. A federal government hesitant to fix the economy is as dangerous as the same practices and products that got us into this mess.
Paul Krugman, a liberal op-ed economist of the New York Times, and Martin Feldstein, Ronald Regan’s conservative former chief economist, both agree that more action is needed on behalf of the federal government to hasten the recovery. In the political mess of Washington, the hopes of a bipartisan effort to fix the economy ebb with every election. Luckily, a branch of the federal government is independent from political agendas and is willing to act — the Federal Reserve.
In late 2008, the Fed slashed interest rates to nearly zero to encourage lending. The Fed also made direct loans to banks, bought troubled assets and purchased millions of long-term Treasury bonds. These measures were to ensure the American economy didn’t collapse.
Luckily, the actions of the Fed helped offset the chances of Great Depression 2.0. Earlier this month, the Fed announced another round of “quantitative easing,” also known as printing and injecting money into the American economy. While it is certainly the right step, QE2 will not give the immediate development that millions of Americans salivate over. Rather, political action is necessary to jump-start this recovery — it is up to the American Congress to get the ball rolling.
One of the most basic ways to help unemployment is to give federal aid money to states. States are in a bind — some of their budget gaps are larger than the GDPs of small countries. As a result of huge debts, states terminate jobs to cut expenses.
There is no question that the first bailout prevented an economic catastrophe of high unemployment and terrible wages. But the bailout was, and still is, deeply unpopular among voters and members of Congress. A second wave of federal stimulus money, albeit seen as unthinkable by voters, is absolutely necessary to create jobs.
A GOP-controlled House is what many Americans want. But voters must realize that this economic slump will be prolonged without healthy state and local economies. Our elected officials fear giving more stimulus because of voter discontent — huge public deficits were a huge topic in the recent midterm election.
Voters are reasonably afraid that huge deficits pose a substantial threat to the future of their global competitiveness. They do. But at the same time, the benefits of taking on more short-term debt far outweigh the consequences of a prolonged stagnant economy.
Sam Adams is a senior integrated marketing communications major. E-mail him at firstname.lastname@example.org.