Economic Theology: Cut, Cap and Balance.

Have you made plans for a double-dip recession?

Republicans are circulating amongst themselves, a pledge called the "cut, cap and balance", where they cut spending, keep the debt cap in place, and pass a balanced budget amendment.  So let me point out why this is crazy talk:

• If you CUT federal spending it will only do one thing in a sluggish economy: increase federal debt. Job cuts are job cuts regardless of private or public, which will result in lower tax collections, fewer people spending, job cuts in the private sector in response to lowered consumer spending.
• But you can't increase debt spending, because the pledge CAP holds the debt ceiling in place, which by itself, would reduce federal spending by over 33%.
• That means more cuts to federal spending, thus completing the feedback loop.
• And a balanced budget amendment would effectively prevent the federal government from intervening in economic swings.  If you were a fan of Bush tax cuts in 2001 and 2003 and trickle-down economics, no such thing would ever occur in response to a recession.  If you were a fan of direct federal spending projects to offset a drop in private spending (aka Keynes), the only response from 1932-1939 would be continued cuts in federal government. Forced to BALANCE a budget, we would never have been able to go to war in 1941 and defeat the Axis, either...the last huge run-up of federal debt.  If you're going to pick a time to attack an American ally, it'll be right after the US gets a balanced-budget amendment put into the US Constitution, and here's why: you destabilize America's economy either way (instability over a war that the US won't get involved with, or the economic havoc wreaked at home because the US has to reapportion money from domestic programs to a war.)

The debt ceiling will remain in place - as I have repeated before - because Republicans have bought into an ECONOMIC THEOLOGY that cuts will restore confidence, or as has been periodically, alternatively argued by Conservatives, cuts will stop crowding out private spending.  Yet, the evidence is clear: wage growth is stagnate for everyone except the biggest 200 company CEOs, whose salaries have increased a whopping 23% since 2009, so clearly public spending is not crowding out private spending in this economic recovery.

If you needed further proof, Michelle Bachmann has gone off the deep end by making it a requirement to repeal the Affordable Healthcare Act, before she will vote on increasing the debt ceiling.  Obviously, her vote to raise the debt cap is never coming.

So this leaves us with one overwhelming fear: Republicans do not intend to compromise, period.  Rather, they intend for Democrats to capitulate.  Once Democrats capitulate, Republicans will be able to share the blame on Democrats, saying such things that Democrats took too long to cut, therefore causing the double-dip.

And either way, we will be facing severe austerity spending cuts.  So I say: have you made plans for a double-dip recession?