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So-Called Fiscal Cliff Is Baloney; Our Economy Can Recover if Obama Focuses on What We Really Need: Jobs!

Talk about deficits and tax cuts distracts us from the great New Deal lesson: An economy recovers when people go back to work.

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It would, at the very least, act as an transitional job, enhancing the ability of workers to move back to the private sector as and when private sector demand revived and job recruitment efforts intensified. The latter would have a pool of “shovel ready” labor on which to draw, rather than an army of unemployed with corresponding deteriorating job skills, which invariably set in with longer-term unemployment.

As for the canard that only private sector jobs are “real” jobs, that’s bunk. Businesses don’t really care who’s on the buying end of the transaction. They just want to sell everything they produce. It can be bought by domestic households, foreign households, domestic government or foreign government. Makes no difference. What they need – what benefits them – is an environment that maximizes the probability that there will be a demand for what they are trying to sell. If there isn’t enough total spending in the economy, then the government can cut taxes or raise government spending (good deficits) to induce the right amount (non-inflationary) of spending.

Unlike the household sector, the government sector (with a sovereign currency) can sustain its deficit spending in the long run. And that spending will ultimately generate the growth that will generate the incomes and jobs, which will enhance tax receipts and reduce the deficit. It’s a win-win, if only the president would have the courage to make the case, rather than meekly fighting his campaign on the GOP’s intellectually tarnished and politically dishonest ground.

Marshall Auerback is a market analyst and commentator.