The Dow Jones Industrial Average dropped another 3 percent today as Wall Street metabolized the truth most Americans already know: We're in a recession. The "double dip" has arrived.
Most Americans never really emerged from the Great Recession anyway.
We can get out of this recession but not via the Fed's "quantitative easing" alone. When consumers can't spend and businesses won't spend without additional consumers, government must be the spender of last resort.
Juicing the economy back to health (notice I didn't use the "s" word Republicans have now vilified) will require at least $700 billion in additional federal spending this year and next. (This number takes account of state and local government cutbacks as well as well as the current shortfall between current economic activity and the economy's productive capacity at or near full employment.)
But this magnitude of additional spending isn't feasible in the face of Tea Party Republican intransigence. Hell, Republicans won't even spend additional money on flood and hurricane relief. The Tea Party obsession about the federal deficit and the size of the government is prevailing.
Not only is this obsession keeping millions of Americans out of work, it's also starting to bring down the Street.
If this keeps up, we'll have a showdown between establishment Republicans who understand what must be done -- and who will support substantially more federal spending in the short term in order to goose the economy -- and Tea Party zealots who refuse to face reality.
The crack in the Republican Party between its establishment and Tea Party wings is viewed politically as a contest between Mitt Romney and Rick Perry. But in reality it's a brewing fight between economic pragmatists and right-wing ideologues. (Don't expect Romney to call for more government spending, at least before the Republican nomination.)
The Street may not want to Barack Obama reelected, but the Street has an even greater interest in saving its assets and its ass.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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Even though it is now spending $6 Billion dollars per day more than it has. Maybe Moody's ought to downgrade him.
The only recent period in which the United States seems to have had their debt under control was 1996 to 2001. That period of economic prosperity was book-ended by long periods of extremely high national debt growth.
Our massive debt is a direct result of "supply side" economics of tax cuts for the wealthy and the "national security" policies of unneeded "star wars" programs and unneeded real war with Iraq - which provided no security and after wasting more than a trillion dollars in Iraq and has no hope of providing ANY benefit to America for the investment of blood and treasure.
Republicans, then, are the fiscally irresponsible party of "Borrow and Spend".
And this is the party that the Tea baggers join with to promote their view of "fiscal constraint", which consists entirely of "spending cuts" while maintaining or increasing revenue cuts (lowering taxes).
Call me silly, but that is a lot like joining the Ku Klux Klan to promote affirmative action for African Americans - and, it has just about as much chance of success.
I particularly enjoyed that analogous caveat at the end.
Fanned and faved.
Simply - Reagan took the debt from $900 billion to $2.6 trillion, nearly tripled - Bush 1 added another $2 trillion (to $4.6 trillion in just 4 years) again almost doubling the debt - Clinton reduced the growth of the debt to 25%, to $5.6 trillion - and left a budget surplus of $246 billion. Bush (the lessor) nearly doubled the debt to $10.6 trillion and left a budget deficit of $1.4 trillion.
Our massive debt is a direct result of "supply side" economics of tax cuts for the wealthy and the "national security" policies of unneeded "star wars" programs and unneeded real war with Iraq - which provided no security and after wasting more than a trillion dollars in Iraq and has no hope of providing ANY benefit to America for the investment of blood and treasure.
Republicans - the fiscally irresponsible party of "Borrow and Spend".
And, since republican administrations have presided during the creation of over $9.8 trillion of the debt, why do you contend it is "Both parties got us into this mess" and join the biggest spenders to fix the problem?
Finally, I can agree with a flat tax - with the following provisions:
1) no personal deductions
2) no business deductions (other than investment, labor and business costs)
3) tax applies to all businesses including the business of religion.
So since they're both evil, you're happy to choose the more evil of the two instead of the less?
Shooting yourself in the foot and shooting yourself in the face both hurt. Sure you can't tell the difference?
The only difference between the Democrats and RINO's and to a lesser degree the Establishment in the Republican party is the speed at which they are moving (in the wrong direction).
The concept of spending that brought us out of the Great Depression was facilitaed by the war, and yes, the end result left us with a strong infastructure to build on, plus we were the only strong industialized nation left standing. During that period we spent well over 100% of GDP, but, it had pupose which allowed for direction. These current stimuls programs appear to have neither and are only directed at maintainance.
Well, keep throwing it out there and I will do the same. Trying not to get grumpy.
I am more in favor of oldngrumpy's approach, however, it fails to address the reality that we will not be making product in this country again for some time; unless we accept a very degraded standard of living. The concept of punitive action to force capital back to work again is a must.
We currently base the value of our speculative investments on measures and meters designed for the production of goods and the retention of cash. We have long been past the center point on the supply (making of goods) and demand (consumers) line. If we are going to force liquidy, through these punitve measures, back into working capital we have to find a way to equatibly transition the value of our speculative investments to our true placement in a consumer drivin economy. In other words the production of consumers capable of maintaining an acceptable standard of living.
Ideas on how to make this equitable transition are what I am hoping to start generating.
There is one other factor in all of this, the 7 billion people, and our demands on resources.
No, what you mean to say is that YOU are totally ignorant of economics, so YOU are totally ignorant of what has and has not worked in the past, YOU are totally ignorant of both American and European economic history, and so since YOU don't know any example of why it wokrs, it must not work.
Try actually looking at periods in the last 80 years when America was kicking butt and check the tax rate. Look at the periods in which America was gettign its butt handed to it and shipping all its jobs and money overseas.
Then get back to me with your assessment of what never works.
welfare to illegals in LOS ANGELES COUNTY alone now exceeds $600 million per year!
MEXICANOCCUPATION.blogspot.com
Finally, put a tax on cash -- banks do it now to ppl. Let's do that officially, for individuals as well as for corporations. Let them beef up their assets -- in another age that much cash made a company a target for take-overs, and for a few wealthy companies (GE, Google, etc.) they're still in an position of advantage .
Re-instate the Uptick Rule. No one should profit in the free market of an investment driven growth engine by stocks going down. The Uptick Rule made allowances to short your OWN position to a limited amount to soften devaluation in market price, but repeal has removed all limits as well as allowed borrowing of stocks, no longer requiring shorts to have held an actual position in the stock.
If you really want to fix the economy, especially in the future over the long term, remove the gambling of my home mortgage payment and savings account with the stock market. The Glass-Stegall Act made sense in 1934 to prevent wild swings and crazy "too big to fail". Repealing it allowed SO BIG TO FAIL to hurt mom, kids and dogs. And a few profit. That's decidedly Un-American.
Let's say you own a house (America) one of the nicest homes in the neighborhood (best country in the world) the value of your house went down from $2 million to $1 and you still have a mortgage (national debt) of just under a $1 million. You find that your roof leaks (infrastructure is crumbling) and, with winter coming on, your heater needs replacing (energy requirements). What do you do? Do you borrow money to fix the roof (repair the crumbling infrastructure) so your property does not lose more value? Do you borrow money to replace the heater (pay for foreign oil) so you do not freeze in winter? Do you ask those family members in the house to do with a bit less allowance and contribute more to the household (increase taxes on those who can afford it or cut welfare on those unwilling to work)? Do you walk away from your house (flee the country) and mortgage (default on the debt)?
Just curious - what is your plan?
Should spend $1B on me. Give me $1B. I will build a new house. Will buy lots of cars, computers and iPhones. New wardrobe. I promise to spend, spend, spend. Create lots of jobs.
Don't like that idea? Should send it to you then. You can spend, spend, spend and create lots of jobs.
Don't like that idea, give it to Solyndra. Who should we give YOUR money to?