What if Austerity wasn’t the answer? Light and shade of the new budget proposal

obama_austerityThe US President Barack Obama says no to austerity and launches a large public investment plan

While the world is debating over the wisdom of austerity economics, the budget proposal presented on Monday by the US President seemed to call for an end to what the White House defined as “mindless” measures and a change of scenario: from a focus on deficit-cutting to a period of economic reinvestment. As his second mandate is coming to an end, Obama is not giving up on his goal of a welfare plan for the poor: he presented a collection of tax measures and education initiatives meant to help middle-class families pay for childhood education and college tuition.

“More of a political document than an operational plan” was how the U.S. Chamber of Commerce defined Barack Obama’s proposal. According to most Republicans, development and reprise cannot be achieved by increasing taxes on the most productive sectors of society, because it would just lead to a cut to both investments and job opportunities. They rejected a broad new tax on big financial firms and a lack of new measures to limit entitlement spending, the biggest contributor to federal deficits, while the plan seems to focus on combating climate change and promoting renewable energy technologies.

“We’ve got to put politics aside, pass a budget that funds our national security priorities at home and abroad and gives middle-class families the security they need to get ahead in the new economy” replied the President, who actually mentioned a number of domestic priorities that may appeal to Republicans. For instance, his request for a corporate-tax increase to pay for huge infrastructure spending seemed to agree with GOP leaders, as did the 4.5% increase in military spending. The $612 billion in overall military spending include funds for the West’s confrontation with Russia against Ukraine and the U.S.-led fight against Islamic State militants in Iraq and Syria. $14 billion were also reserved for cyber-security measures, and $2 billion shared between the control of flow of illegal immigrants from Central America to the U.S., and research on new antivirus and other drugs.

Obama’s strong endorsement for a more expansionary spending policy is significant not just for the US economy but for European countries such as Greece and the UK, that are still struggling over the recovery from the banking crash, and wondering whether austerity may help them or not. On CNN last Sunday, the US president further stressed the idea that led to his budget proposal: “You cannot keep on squeezing countries that are in the midst of depression”, he said, referring to Greece. And he confused and divided the British public opinion by appearing to back David Cameron’s budget cuts: “(he) must be doing something right, because the economy is growing” was his comment.

Nobody thought the Congress would embrace and enact Obama’s proposal as it is, especially considering the current Republican-controlled legislature. But we can only wait and see is how it will impact the debate on the country’s future ahead of the 2016 presidential election.

Maria Felicita Ferraro

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