It ain't sexy, I know, but a word about the economy and the presidential debate.
Wall Street banks are holding a fire sale; employment is down, holiday sales tanked. Burdened with record debt and stagnant incomes, homeowners are about to reckon with declining home values, their largest investment, with a projected $2 trillion in assets evaporating in the course of the year. Even clueless George -- "the fundamentals are strong" -- Bush admitted a little stimulus might be needed.
So finally, the R word -- recession -- hit the presidential campaign trail. In the January Myrtle Beach Republican debate, the candidates were asked what they would do to get the economy going in the event of recession. The answers expose just how preposterous conservatism has become.
John McCain, who at least admits he doesn't know much about economics, said the first thing we need to do is" stop the out-of- control spending.... As president, I know how to do it. I'll wield that veto pen, and I won't let another pork-barrel earmark spending bill cross my desk without vetoing it. I'm called the sheriff by my friends in the Senate who are the appropriators, and I didn't win Miss Congeniality."
Charming, but completely wrong headed. A recession is caused by lack of demand. The squeeze on working families has them tightening their belts. Companies lay off workers. State and local governments, mandated to balance their budgets, choose between deep cuts in spending on education and health care or increased taxes. Only the federal government is able to act - by spending money or cutting taxes, adding to a short term deficit to get the economy moving. (The Federal Reserve can also try to lower interest rates, but with the dollar sinking and credit markets shattered flooding the market with money may just feed inflation without much effect. And in fact, the Fed's previous interventions under Alan Greenspan helped blow up the bubble that triggered this mess).
Rudy Giuliani just released a big tax cut plan, so you'd expect him to take McCain apart. Nope, the Mayor was as lost as McCain: "You also have to cut spending as significantly as you cut taxes. You have to be willing to impose cut-backs on each one of the federal agencies, the civilian agencies. "The main things you have to guard against are overtaxing, overspending, overregulating and over-suing." "Over regulating?" We're suffering a credit and housing collapse that derives directly from the LACK of sensible regulation to hold lenders to basic standards like reviewing borrowers' ability to pay.
Mike Huckabee showed that he could feel people's pain, and then suggested he'd increase it, calling once more for his "fair tax" that would cut taxes on the wealthy and increase them on working and poor people. Not exactly a remedy for the economy no matter what condition it is in.
Libertarian Ron Paul at least was true to his principles, which he stated as unintelligibly as possible. After ruling out monetary or fiscal relief, he called for attacking this with the "Austrian theory of the business cycle. For the few of you not familiar with Austrian economists, the Austrian theory of the business cycle is simply to let her rip... "The longer you delay the recession, the worse the recession is," said Paul.
In this crowd, only former Governor Mitt Romney offered a passing glance at common sense. Before lurching into his requisite pander about fighting for every job in Michigan, he urged that we "stop the housing crisis (without telling us how), and "immediately cut taxes" on middle income Americans. He then argued that we get "gas prices under control" by becoming energy independent and invest in research and development, good ideas that would take far too long to have any effect on turning around a recession.
The contrast with the Democratic field is stark. Once more John Edwards drove the debate, releasing a serious short term stimulus plan, mixing tax rebates for low income people with direct spending and aid to the states. Hillary followed with the largest plan, with a good mix mirroring that of Edwards. Obama's plan relied almost entirely on tax cuts, quicker but less effective than direct spending.
Democrats on the Hill seem more muddled. The conservative Blue Dog Democrats are reported as demanding that the tax cuts and spending of any stimulus "be paid for," which would, of course, eliminate their stimulus effect. This preposterous proposition apparently has led Speaker Nancy Pelosi and Sen Harry Reid to seek pre-emptive agreement with Bush on a plan. That virtually ensures that what emerges will be too small and too weighted towards tax cuts. (The President suggested that repealing the estate tax permanently would be a stimulus. Other than titillating the Paris Hilton's of the world, it isn't clear what he had in mind).
This debate has just begun, but it's got to get a lot bolder. This is a $13 trillion economy wounded by successive body blows. It will take a lot to get it turned around. Consider the last recession after the collapse of the dot.com bubble and the shock of 9/11. The Fed lowered interest rates to the lowest levels in memory; Bush racked up record deficits with massive top end tax cuts and increased spending on the military and homeland security; Chinese and Japanese central bankers lent the money needed to prop up the dollar and limit inflation - and still we witnessed a slow recovery in which employment as a percentage of the population and income never returned to pre-recession levels. Now the economy is weaker, the damage more serious, and the Chinese and Japanese more sober. It is going to take heavy lifting to get this economy moving again.
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The sad thing is that the Democrats are setting on the sidelines letting the Republican
Republican
WAKE UP SHEEPLE!!!
Hi, welcome to McDepressi
LOL
I don't agree though with Mr. Borosage that the reason their is a recession is because of lack of demand. In order for people to spend money they have to have it and the facts are that all the wealth of this nation is being flushed down a toilet in Iraq and being hoarded by that small percentage of wealthy folks. Besides that why should we the populace even spend our money. It all ends up in offshore banks. What we should do is lessen our needs and only buy that which is made close to home. We should be encouragin
Now that's a rather historic stretch. I think that you'd find my comfort in the views of Dean Baker on the bubble - and on what it meant and what the costs of that late 90's bubble were to be.
But first, everyone take a deep breath and remember: As a country we still celebrate and keep repeating that it was a period of great prosperity (and well, I don't buy the peace part, either) -- it was a period of extreme greed, fueled by venture capitalism gone a bit mad, corporate and accounting fraud that was occurring then (look at the dates of the dirty deeds in the hundreds of indictment
The immediate effect of that bubble crash? We all know Robert Scheer -- in a satarical moment he noted in his LA Times column June 6, 2000 What great news last week--116,
Dean Baker's view was that leaders in the late 1990's were worse than Herbert Hoover in not addressing the bubble sooner. Millions of folks lost their jobs when it popped, and it sent the government (and the states) reeling into massive deficts -- that is what blew the surplus.
As Baker said, the crash resulted in about $8-10 Trillion in excess equity being peeled off -- but that it was just a return to something approachin
Boom and bust. We must address this syndrome.
A fiscal conservati
As far as the tax cuts they need to stay. Say what you want about they only benefit the rich, but the tax burden paid by the top 1% increased from 36% under Clinton to 40% under Bush. The top 50% of wage earners pay almost 97% of the tax debt. That leaves a little over 3% left for the bottom half. If you make 60K a year you are in the top 50%.
You can drone on about "subprime lending" till you're blue; but the real source of our woes lives at the top of the pyramid. The "best & brightest" on Wall St. bought into these CDOs ( Consolidat
At least 30% of the costs of oil is in the "fear factor" generated by the instabilit
Continued next post due to size restrictio
Remember, how Bush explained that will create jobs and push the economy and then the opposite happened. He bragged how many more new homeowners there are and now the trend reversed.
Are we sick of the GOP yet? Bush is in Saudi
asking for more production of oil yet the markets are flooded. He could get the price of gas down NOW if he would reign in the hedge funds and the future's market. Had he had any interest at all the new energy bill would have had a much higher CAFE STANDARD, ergo all these
current attempts are just to fool the public.
And I don't see where the top candidates are taking this initiative either. Vote Kucinich
or Ron Paul. Don't let the press dictate to you who you should vote for.