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We Need a Trigger Cut

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Robert Reich on Bill Moyers Journal.

The fiscal cliff doesn’t have to be a nightmare — not if we understand that we face two big economic challenges ahead: getting the economy back on track, and getting the budget deficit under control. And if we attend to both in the right order.

We can’t attend to both at the same time because the two require opposite strategies. We get the economy back on track by boosting demand through low taxes and continued government spending. We get the budget deficit under control by raising taxes and reducing government spending.

It all boils down to timing and sequencing: First, we get the economy back on track, then we tackle the budget deficit.

If we do too much deficit reduction too soon, we’re in trouble. That’s why the fiscal cliff is so dangerous. The Congressional Budget Office and most independent economists say it will pull so much demand out of the economy that it’ll push us back into recession. That’s the austerity trap of low growth, high unemployment and falling government revenues Europe finds itself in. We don’t want to go there.

Although the U.S. economy is picking up and unemployment trending downward, we’re still not out of the woods. So in the foreseeable future — the next six months to a year, at least — the government has to continue to spend, and the vast middle class has to keep spending as well, unimpeded by any tax increase.

But waiting too long to reduce the deficit will also harm the economy — spooking creditors and causing interest rates to rise.

This is why any “grand bargain” to avert the fiscal cliff should contain a starting trigger that begins serious spending cuts and tax increases only when the economy is strong enough. I’d make that trigger two consecutive quarters of six percent unemployment and three percent economic growth.

To make sure this doesn’t become a means of avoiding deficit reduction altogether, that trigger should be built right into any “grand bargain” legislation — irrevocable unless two-thirds of the House and Senate agree, and the president signs on.

The trigger would reassure creditors we’re serious about getting our fiscal house in order. And it would allow us to achieve our two goals in the right sequence — getting the economy back on track, and then getting the budget deficit under control. It’s sensible and do-able. But will Congress and the president do it?


Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was secretary of labor in the Clinton administration. He has written 13 books, including the best sellers Aftershock and The Work of Nations. His latest book is Beyond Outrage. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. Reich writes most days on his blog at RobertReich.org.

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  • David F., N.A.

    Getting the economy back on track before getting the budget deficit under control sounds like the right thing to do, but what about the underlying problem where our manufacturing jobs are continuing to leave the country? Spending money on government projects, at this time, would be like trying to fill a bucket with a gigantic hole in the bottom of it. So, before we do anything else, we first need to address tariffs and the Chinese devalued currency. This alone would probably patch the entire hole (or get darn close), and then we could start throwing government money around. Well, before I get in trouble again, I better go clean up after the dogs.

  • http://twitter.com/AriannaEditrix Arianna

    If only Washington would listen to Professor Reich! Austerity will only make things worse for every single person who is NOT in the 1%. And folks, that means almost everyone, we are not “temporarily embarrassed” for funds, we are barely treading water where a lot of folks have already drowned. Think Titanic and you’ll see who’ll get the lifeboats.

  • http://www.facebook.com/kathleen.ryanberger Kathleen Ryan-Berger

    We should first start cuttting big business, bank, congresssional, and tax entitlements to the wealthiest Americans. That is a great starting point.

  • ScokieScot

    We can’t expect the people who put us on the precipice of this cliff to figure out how to get us safely back away from it. We need to think differently. The problem is not taxes. It’s overcharging by the private sector. For each dollar we spend we get about 25 cents of goods and services. The private sector bureaucracy is a voracious, bottomless pit for profits. I had my yearly physical for which the bill was $600. My insurance company said those services were worth only $125. My doctor accepts that reduced amount, and no doubt is making a profit. A $90 pair of tennis shoes costs $3 in wages and $20 in materials and production equipment. The problem is the costly private sector bureaucracy and salary/bonus gluttony. The CEO of United Health Care gets about $100 million a year. That’s a lot healthcare diverted to gluttony.

  • Dominic Jermano

    Mr. Reich is dreaming. No way can the USA reduce the debt in the future. You are talking major energy use, which means major pollution and environmental chaos, simply to save USA reputation. And in the end that reputation would be useless.

    Furthermore, what needs to be done is to literally have Congressional Agreement that the USA must declare bankruptcy, cancel all debt repayment, and start again.

    When this happens, it means a change of doing business. This means no more Federal Reserve, who can simply create money out of thin air, loan it out, and then expect the Public to repay it with interest. That ladies and gentlemen is the most craziest they have done to us. They create that money out of thin air, by printing it, then they expect interest payment in return, in which that interest money is never printed, because it does not exist.

    We live not in reality but made up numbers and false debt. The rich politicians make the decisions to procure debt, but they refuse to accept responsibility for their decisions, proves they know they are liars, and have no ability to. In fact they are as poor as the rest of us living in the illusion they have wealth.

    Yes the end of the Old USA has arrived. Time to face it, and deal with it.

  • http://www.campbellpetro.com/ Donald Campbell

    With climate change effects in mind, your trigger proposal seems reasonable. I hope Obama is listening.

  • Anonymous

    Luckily even Germany is starting to reevaluate the extent to which they want to participate in the “toilet swirl” economics model of irresponsible austerity. Neoconservatives were all cheers over Germany’s insistence upon austerity, while progressive economists quoted Admiral Ackbar from Star Wars: “IT’S A TRAP!!!” Sure enough as Germany saw itself killing off its own GDP as a direct result of the irresponsible austerity it was trying to impose upon its neighbors, Germany has started to sense the trap.