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It Was the Economy in 1992; in 2012 It's Survival

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If you are poor, survival is a day to day issue, only now it's tougher than anyone can remember who's not 90-years-old. If you are middle class, staying middle class has become the issue. The economy is off of some of its crutches, but it still has a ways to go before the jobs lost in the Bush recession are recovered. It's been 4 1/2 years of recession with relatively anemic growth just barely technically keeping us from calling this a 4 1/2 year depression. This on top of a net 12 year drought in jobs.

The 2012 elections, from city/county to U.S. Congress/Presidency, will determine whether the economy gets worse or better. It will for some determine whether or not they live or die. Indeed, it may well be a matter of survival of the country.

In every recession since the Great Depression, there has been bipartisan agreement on how to recover from it. The solution has always been government stimulus, Keynesian government spending. Government regulation of finance and Keynesian fiscal policy have caused recessions since the Great Depression to be shallower, shorter and less frequent.

This doesn't seem to matter to the Tea Party conservatives that have risen to control of the GOP. They insist on eliminating financial regulation down to pre-New Deal levels and insist that the way to fight a recession is to cut government spending. It seems they think that things were somehow better when we had twice the recessions that were twice as long and twice as deep. It's willful dogma that would be humorous except we somehow elected these ideologues to public office from statehouses to the U.S. House in majorities important enough to make their thinking a serious threat to our economy and the country in 2010. After all, a country with a crappy economy can't be a world power.

Well perhaps if the Tea Party doesn't find the historic economic record convincing, maybe they can find logic convincing.

Cornerstone of the new Tea Party/GOP philosophy is that Keynes was in error. To the Tea/GOP the opposite is in fact true. Government should not only refrain from spending during a recession but reduce spending during a recession in order for economies to recover. Logic argues otherwise.

In a recession, prices deflate. Prices for goods and services decline because there's less money participating in the economy relative to goods and services for sale. Getting more money into the economy raises prices. With more money in more hands there's more money relative to the available goods and services. Price decline is the ultimate definition of a recession and price inflation is the ultimate definition of economic growth. Government and the Fed try and avoid both extremes.

The Tea/GOP seems to believe that taxes go into a government cloud of wastefulness never to be seen again. Liberals believe that profits disappear into a cloud comprised of the individual hoards of the rich never to be seen again. It is on the question of which perspective is right that the 2012 elections will ultimately turn.

If you cut taxes it will prevent the government from sending more money into the wasteful cloud and so put money back into the economy. If you tax the rich it will prevent sending more money into the hoard cloud and so put money back into the economy. In terms of economic recovery both views acknowledge the need to free up money for the economy in order to facilitate a recovery. How you do it is the question.

Government spends what it takes in immediately and mostly then some. There is no government hoard of money that's disappeared from the economy. Bush famously cut taxes to refund the Clinton surplus to the public. Taxes all go back into the economy immediately whether it's through spending on food stamps or cannon. There is no government waste cloud in terms of economics. All the money collected is recycled into the economy and is counted in the calculation of GDP.

Private wealth is a different matter. The objective of private wealth is to create more wealth. If it is spent it's to invest and garner more private wealth through interest or equity. It is thus both a drain and beneficiary to an economy, providing capital for growth while extracting money from the economy for the service. The money extracted as profit will then, ostensibly, be reinvested in some future venture and reenter the economy. Investment too is a component of GDP, but it waxes and wanes following the trend of the two other major GDP components, government spending and consumer spending. It never leads, it only follows.

If there is no profit to be made from an investment, private wealth will not be invested and will not reenter the economy. It will not reenter the economy as investment until the economy has already recovered and growing. There is no theoretical reason for it to do so, it's private interest serving a private interest instead of the public interest. Frankly, the more private wealth there is means there's more damage done to the economy when it's withheld due to an economic downturn. Wealth is then both an enabler and destroyer of economies without any particular understanding of it's nature and power.

Since both sides of the economic issue agree that getting more money into the economy is necessary, either by cutting taxes on the rich in order to create more capital for investment or by taxing the rich to fund government works, which is more likely to produce a near term result?

Since capital investment lags consumption, then often overshooting the end of demand causing a recession itself, the answer to both recession and inflationary growth is in government moderating the amount of capital that is participating in the economy or not. The Fed has been tasked with moderating deflation and inflation through banking channels, but is clearly overmatched with the depth of this recession. Taxing private wealth to return it to the economy when it will not voluntarily reenter it through investment should be seen as no more than the rational answer it is, rather than a doctrinaire absorption with inequality.

Some Republican president guy once said a rising tide lifts all boats. The inverse is implied. Since money needs to be injected into the economy for it to recover and private wealth won't supply it in hard times, and since government doesn't have a cloud full of money that can be drained to supply it, then the only source for the funds required to get more money into the economy is private wealth. If the Tea/GOP wants their boat to rise, they can't depend on their own kind to raise it.

In 2012, you vote for or against raising taxes on the rich to supply money for economic recovery. The total resistance of the Tea/GOP to raising taxes on private wealth in order stimulate the economy is the only thing that is different in our economic policy history of the last 80 years. 2012 is not a referendum on Obama, it's a referendum on the new Tea/GOP, and the survival of the nation, economy, your job and your family depend on which cloud you believe in.

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33 out of 100 seats are up for election. 51 are needed for a majority.
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