Two major events have headlined economic news today. In a speech in the small town of Osawatomie, Kansas, US President Barack Obama attacked the Republican “trickle-down” economic theory, warned of a threat to America’s middle class, and reaffirmed the importance of various measures to address the gaping inequality in the US. In the Parliament House in Athens, Greece, the coalition government passed austerity measures with 248 votes to 51, as protesters and police clashed outside.
Obama: Trickle down economy “has never worked,” US marked by “gaping inequality”
In one of his most expansive speeches to date, President Obama called supply-side economics, also known as “trickle down economics,” a failure which has given an outsized voice to the wealthy few and distorted American democracy. The speech also contained comprehensive lines of attack against candidates seeking his job, without an overt plea for a second term. He also signalled tougher penalties for bank fraud and stricter limits on financial institutions.
Obama mentioned the Tea Party and the Occupy Wall Street protesters, and said that it was little wonder that the “breathtaking greed of a few” been met with outrage. He sympathized with their concerns, saying “this isn’t just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, and all those who are fighting to get into the middle class.”
The president highlighted the importance of investing in infrastructure, education, as well as Medicare and Social Security. Furthermore, he spoke scathingly of banks’ opposition to new financial regulations, which are meant to prevent institutions from “breaking the law, cheating consumers or making risky bets that could damage the entire economy.”
Obama has been criticised by Republicans for his attempt to liken himself to Theodore Roosevelt, and more significantly for his economic record insofar, the high unemployment rate and a moribund housing market and the bulging budget deficit.
"You have a president of the United States who's been in office three years and has no plan for our economic vitality," said Mitt Romney, a top contender for the Republican nomination to take on the President next November.
Report: Barack Obama channels Theodore Roosevelt as he addresses America’s gaping inequality [The Telegraph, 7 December 2011]
Report: Obama sets campaign theme: middle class at stake
[Associated Press, 7 December 2011]
Report: Obama signals tougher penalties for bank fraud [Financial Times, 6 December 2011]
Report: Full text of President Obama’s economic speech in Osawatomie, Kansas [The Washington Post, 6 December 2011]
Report: Obama attacks Republican economic theory: “It’s never worked” The Washington Post [6 December 2012]
Austerity measures passed in Greece
As protesters clashed with police outside, the Hellenic Parliament passed an austerity budget designed to cut the Greek deficit from 9.0% of the GDP this year to 5.4% in 2012. Prime Minister Lucas Papademos described the budget as a first step in a process to reverse disastrous fiscal policies that have burdened Greece with great state debt. A leading labour expert warned that the Greek population can expect ten years of hardship and enormous sacrifice. The vote came at a sensitive time, after Standard & Poor warned it could cut its credit ratings on the eurozone bloc.
The coalition government, despite their remaining disagreements, approved the budget as it was an absolute priority to safeguard the viability of Greek debt.
The new budget will meet the requirements of an EU-IMF October accord which requires Greece to adopt even tougher austerity measure in return for new funding and a controversial debt write-down deal with creditor banks worth 100 billion euros.
The austerity measures include pension and wage cuts, higher taxes and a debt swap that will slash interest costs. The deficit will also narrow thanks to measures already approved by lawmakers in October, including cuts in public sector wages and pensions, a plan to put 30,000 public sector workers in a labor reserve on reduced pay and a property tax levied on Greeks’ electricity bills.
Papademos’s focus now shifts to the second rescue package and a debt writedown that must be completed by February, after which Antonis Samaras, the conservative party leader, made clear he will insist on snap elections in February when a bond swap deal is expected to help cut the country’s debt.
Report: Papademos Gains Parliamentary Approval for Greek 2012 Budget [Business Week, 6 December 2011]
Report: Greek coalition government passes tough austerity budget [The Telegraph, 6 December 2011]
Report: New austerity budget approved in Greece after clashes [AFP, 7 December 2011]