Say you're a high government official with some responsibility for advising the president on what he should be doing and saying about the economy. You know the economy is still in a deep hole, the deepest since the Great Depression. The jobs report for May was dismal -- a mere 41,000 new private sector jobs, when the economy needs at least 100,000 to keep up with population growth. The Fed projects gross domestic product, the broadest measure of economic activity, to rise about 3.5 percent this year -- a pace barely above that needed to keep pace with the growth in the labor force.
You also know that consumers don't have the buying power to get it out of the hole because they can no longer use their homes as collateral for loans, as they could before the crash of 2008, and they also have to get out from under huge debts. The housing market is still awful. You know businesses are reluctant to create new jobs if there are few customers for their goods or services. And you know export markets are drying up because of a high dollar that's made our exports more expensive, and Europe has embarked on austerity measures to shrink its deficits. You also know state revenues are way down because of the deep economic hole, and they're forced to raise taxes, cut services, and lay off large numbers of state workers, including teachers.
Oh, and one more thing: You know that all the boosters keeping the economy barely going now are coming to an end. The Fed can't keep interest rates near zero for long because it's starting to worry about inflation. It's already stopped buying Treasury securities and mortgage bonds, and its own deficit hawks are squawking. The federal stimulus is 75 percent spent, and the money will be gone in a few months. Census workers will also be gone by the end of the summer.
So what do you do?
A) Tell the president the economy will either go into a "double-dip" recession or, at best, suffer anemic growth over the next five years -- creating enormous pain and suffering for millions of Americans, and imperiling his reelection -- unless he immediately champions a $300 billion jobs bill, including zero-interest loans to states and locales to prevent them from having to raise taxes and cut services, public-service jobs (cleaning up the Gulf), and a one-year payroll tax holiday on the first $100,000 of income. To sell this, he'll need to explain to the American people why larger short-term deficits are necessary now, in order to get jobs back and the economy growing again so that long-term structural deficits (read: health care and Medicare, mostly) can be tackled.
B) Tell the president you understand the political pressures for deficit reduction are growing, and Republicans are making headway fooling the public into believing that this terrible recovery is due to to excessive government deficits. So so it's perfectly fine for the president to bend to those political pressures. Cut the budgets of most federal agencies by 5 percent, enforce "pay-go" rules that don't allow bigger deficits, build up expectations for the report of his "deficit commission" on December, and tell the American public that we now have to move toward fiscal austerity.
If you choose B, you shouldn't be advising the President.
This post originally appeared at RobertReich.org.
Ecology--from the Greek meaning "the study of the household"
Running our planet without first studying it and learning how it works is like piloting a helicopter without knowing how to fly it, by pushing buttons at random. Economists are piloting our crashing spaceship earth.
Ecologists have discovered that stable ecosystems have things in common: a stable population of diverse species with enough natural resources for all and low entropy, meaning that little or no garbage and pollution is produced because everything gets recycled.
Economists give little consideration to the way our planet works. They are like gamblers guessing what to bet on next that will "grow the economy", betting that economic growth is the answer to all our problems. They join the theocrats in pushing unsustainable population growth, in economist's case, to provide ever cheaper labor.
In their quest for endless growth, economists do not consider the species they drive to extinction. They are apologists for a cancerous plutocracy that pollutes our planet and kills our biosphere with their pollution and garbage and that employs economists to push for more growth to avoid having to share.
Despite the impressive jargon they produce, economists have a worse record of predictions than bookies do. (from a Science News study). Voodoo economics still runs the world.
However if we must address the federal debt, we'll always have the option of taxing the rich (in honor of bank robber Willie Sutton) because that's where the money is and it is about the only place where you'll find any of it. People who live in glass houses should restrain themselves from throwing stones.
- green/blue investments with a going-forward preferential rate for capital gains realized from those investments.
- green/blue R&D, above and beyond what is currently available.
- purchases of green/blue goods and services.
Funded by?
- Tax fossil fuel suppliers back to the Stone Age, domestic and imported. Big oil/gas will adapt or die - just like the human, plant, and animal life of the Gulf must do now.
- Big consumption taxes on gasoline, kerosene, home heating oil, diesel fuel, natural gas, and propane (and any other derivative I've neglected to mention) - to push energy demands in the right direction.
But those are the mechanics. We still need the "man on the moon" speech. Delivered by Obama, who is still the best orator going. Others are better writers, but I see the mission as, essentially, despite everything, to imagine our life on a green (and blue) planet, free from the environmental and economic devastation and the stranglehold of foreign entanglements that our energy demands have wrought. Imagine what we will have learned on the journey, about our land, sea, and air, about ourselves.
Mars, Schmars. Merge NASA into NOAA. We are not fit to explore other worlds while we are befouling our own.
However, there may be - and I think there are - some more options on the table. The problem with A is that it may turn out that a few month or a year from now, you will be back to the exact same choice of pumping even more money in or letting it fold.
Maybe it's time to fundamentally re-think our socio-economic system and replace it with something decent. I'd say, yes, it's high time to do that.
Unless government policy has so strangled the economy that they either don't have savings or the money they make from unemployment provides them with greater stability than striking out on their own.
Small businesses were started by people who took a chance.
Right now, everything is so screwed up and unstable who wants to take a chance?
One business owner I know started his business with 10,000 saved from years of corporate work. 8 stores bringing in NIBITDA 200K/month. Oh, crap, you didn't save money? Maybe start saving now?
Helicopter Ben will come to the rescue! LOL
Article 1, Section 8, of our Constitution gives Congress the authority to create money. To that end, the Federal Reserve Banks should be nationalized and used to establish a rational monetary policy.
Of course, we do need the president on our side. He seems to be standing aloof on so many issues.
What happened to fire in his belly? He campaigned like tiger. Now he seems more like an observer than a doer.
At least you aren't giving up.
http://www.thelightsinthetunnel.com/LIGHTSTUNNEL.PDF
Regardless of your political beliefs, or economic beliefs, I strongly recommend reading this book as a necessary companion to any discussion of economics.
Automation is one of the strongest factors facing us in the next decade in regards to our ability to restore our economy. Globalization, even outsourcing affect our economy to a much lesser degree than automation does, and understanding how it can impact the economy is essential to any discussion about recovery from the recession.
Simply put, if you do not account for automation, it doesn't matter what theory you believe in, it is based in erroneous information. This book provides a clear, concise and easy to understand discussion of automation, and the very real dangers it presents to any recovery that does not take it into account.
Graphene based computers could be up to 1000 times faster than current silicon. And if they develop plasmonic computers which use quantum electron waves instead of particles, they could be a 1000 times faster than that.
Any job which can be broken down to a set of rules is susceptible to automation. This includes Doctors, Lawyers, Investment Bankers, Cashiers, Salespeople, and eventually almost every job currently done by a human.
This is not a far off possibility. The current crisis was caused in large part because high speed computer automation of stock trades allowed the derivatives market to build far beyond what would have been possible with merely human operators, with that much more damage done when it collapsed.
We SERIOUSLY need to understand that JOB are disappearing far faster than they are being made. Even China and India are being threatened as Voice Recognition systems are growing more sophisticated and such technologies as electronics printing develop.
We are one global market. and Automation affects the world. We must recognize this, and adapt to it.
While you're at it, remeber how the majoirty of oil take out of American ground and American water is sold used overseas, so it's not bringing down the price of fuel in America? How about a tax on oil going into and out of country and tax breaks to big oil for keeping our oil here? We've given them tax breaks for everything else, why not something that helps us rather than helping ol men?
By the way, 77% of France's energy comes from nuclear. While it does have it's own set of problems, it still would cut down a bit on our use of foreign oil. And don't we have the best and brightest? Can't we come up with a lot more alternatives?
Even though you're the smartest guy out there who anyone listens to, and you are, you still think some sort of magic economic engine is going to start up out of thin air and blaze the American economy boldly into the next decade. Let's just keep piling up debt until that magic engine kicks in, and then everything'll be all right.
Somebody sometime is going to have to start staring down the barrel of the actual reality--ain't so such engine coming along. We've reached a saturation point in terms of consumption. AMERICANS CANNOT CONSUME ANY MORE. So there isn't any consumption-driven engine gonna kick in!
We are going to rethink and reshape our economy from the ground up and the inside out, and the first thing we're going to have to do is stop measuring success in terms of overall GDP (which is just a measure of overall consumption). When someone starts speaking that language, it's time to start listening.