Written in response to Paul Krugman’s column in today’s NY Times, Dec 7, 2012:
“The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.
Yet there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now — except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.
Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now — namely, mass unemployment. Yes, we’ve made progress over the past year. But long-term unemployment remains at levels not seen since the Great Depression: as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year.
Worse yet, there are good reasons to believe that high unemployment is undermining our future growth as well, as the long-term unemployed come to be considered unemployable, as investment falters in the face of inadequate sales.”
‘Investment’, above, means by private industry. They’re collectively sitting on some $2 trillion that they won’t ‘invest’ because there’s no immediate guarantee of profit. And by doing so, they guarantee that there won’t be customers for their goods. It’s madness; but it’s understandable. That’s what over-emphasis on private economic activity instead of a balance between private and government economic activity gets you.
Only government investment, in the form of stimulus directly to job seekers, can do what private industry won’t. For that matter, if you forced the banks to forgive the debt of all those who are paying back loans, you’d see immediate recovery of the economy. There is some slight activity, enough to keep unemployment under 10% (I suspect the official numbers aren’t really reflective of those who can’t find jobs, and who have given up for the moment) and underemployment at much higher levels. But a lot of this economic activity doesn’t go to purchases of goods. It goes to bankers. People are paying off existing loans on homes, even when many of those are underwater. They are paying off credit card balances that they acquired back when credit was easy and people had jobs. And many are paying off student loans.
Whatever money is being paid to banks and financiers isn’t buying new cars, or new homes, or new clothing, or better food. It’s not paying for vacations or any number of other things. And until that debt is paid off, those debtors won’t be consumers. And they won’t be stimulating the marketing economy through purchases. We are no longer a manufacturing economy, we’re a service economy; and people who work in service economies don’t make enough to pay off loans very quickly or in many cases pay them off at all. And unless that changes, we’re on the path to becoming a third world nation.
We’re not, yet; but when we’ve become a nation where most of our citizens work for minimum wage in a store or restaurant or office, do you think we can really afford to pretend that we’re still a nation of wealth and power?
Madness? Just gave everyone a hundred thousand to spend. Or just print the bleeping money, hire people to paint lampposts and sweep streets and build a national system of water collection and distribution that would move it from where it’s in excess (floods, such as occurred after Sandy and Katrina and spring snowmelts) to where it’s short, where wildfires and catastrophic drought endangers the nation’s food supply.
Put money not into the hands of banks that won’t lend it, but directly into the hands of middle class people who would spend it and thus revive the economy. They wouldn’t be willing to go work for Walmart or Amazon or McDonald’s at minimum wage, so wages for those place would have to go up. Maybe the executives wages might come down, or at least they’d get skinnier bonuses. Give money to the spenders instead of the gamblers. Or in other words, revive the consumer market.
Put ME in charge of the bleepin’ Treasury. I’d print the money, hand it to the government directly (no DEBT! For that matter, here’s an extra trillion, go pay off the Chinese), fund food stamps and employment of teachers and firemen and first responders and hospitals. If private industry wants to compete in those areas, then compete on the basis of quality; provide BETTER services than are available through basic public services.
While you’re chuckling at that concept, think about this: would it be any worse than what the clowns in Washington and New York are currently doing?
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