New Explainer: Why is Washington Reducing the Deficit Instead of Creating Jobs?

A new Explainer from Dēmos looks at why Washington focuses so heavily on deficit reduction and not on job creation, even as unemployment rates remain high. In short: the affluent donor class and big business interests prioritize deficit reduction and Congress, in turn, prioritizes what they prioritize. As detailed in the Explainer, if deficit reduction was really the priority, Congress would increase spending and invest in job creating projects, like infrastructure upkeep. More people working increases revenue and economic activity, a better way of reducing the deficit than the spending cuts being pushed by austerity advocates.

As seen in the chart below, the general public is more concerned with jobs than with reducing the deficit and has been for the past few years.

In addition to the Pew data, polling conducted after President Obama’s reelection found that 49 percent thought the election was a mandate for job creation while only 22 percent said that the President’s mandate was for deficit reduction. Exit polls after the 2012 election also show that job creation was a priority over deficit reduction. When given the choice between spending money to invest in infrastructure/public sector hiring, like teachers and firemen, versus cutting spending to reduce the deficit, 52 percent said that we should be spending money while only 43 percent said that we should cut spending for deficit reduction.

The affluent, on the other hand, are so concerned with deficit reduction that they are willing to pay more taxes and cut spending on domestic programs, like Medicare and education, in order to reduce the deficit.

Source: Benjamin Page, L. Bartels, and J. Seawright, “Democracy and the Policy Preference of Wealthy Americans,” http://faculty.wcas.northwestern.edu/~-jnd260/cab/CAB2012%20-%20Page1.pdf

Accordingly, the Obama Administration commissioned a deficit reduction panel and austerity measures dominate discussion in Washington. In contrast, there was no job creation panel and efforts to create jobs, like the President’s American Jobs Act or a bill specifically targeted to help veterans, all failed.

The Explainer also discusses how the affluent have a very different view of the role the government should play in job creation. While 68 percent of the general public thinks the government should see that everyone who wants to work has a job, only 19 percent of the affluent believe so. This disparity in support helps explain why job creation efforts go nowhere, despite the strong public support.

The heavy emphasis on deficit reduction over job creation shows why we need to not only get money out of politics, but also out of policymaking. The outsized influence of the affluence donor class and big business interests places our fragile economic recovery at risk and if austerity advocates win this fight, we will likely head right back into a recession. If that happens, the fiscal cliff will be the least of our problems.