We are in the midst of a world-wide recession. It came to our national attention in September 2008, with the stock market crash. Senator John McCain shocked the political landscape by suspending his campaign to rush back to Washington, DC and addressing the financial meltdown which threatened the national economy. As the result of poor business practices and lackluster regulations, the banking industry was upside down in its debt ratio. So much so that it could no longer legally issue credit. To continue operating, it needed a massive infusion of cash – enter the U.S. Government.
Because the meltdown was the result of poor business practices and not the free market, to save the banks in this manner created what economist call a moral hazard. If the banks do not experience the resulting financial discomfort for their actions, what prevents them from doing so again and again? The failure is suppose to produce pain, which leads to growth in the individual or company.
The Troubled Asset Relief Program (TARP) spent $700 billion, and was no different than a parent who bails out a wayward college student who went overboard with a cheaply acquired credit card. This idea was spearheaded by “compassionate conservative” President George W. Bush, Treasury Secretary Henry Paulson, and Federal Reserve Chairman Ben Bernanke as the only way to save the economy. Then-Senator Barack Obama and McCain agreed and signed the bill.
Shortly after he took office, President Obama approved a second round of $787 billion in spending with the passage of the Stimulus Package. The move designed to fund shovel-ready projects that were refused by Republicans under Bush. Unfortunately, this produced very bad blood between the parties and the resulting fight produced a “debt-ceiling crisis” that played out before the American people. International bankers consequently reduced America’s credit rating because no new revenue was authorized to assist in paying down debt.
Mind you, all this “stimulus” occured in about six month’s time.
Our ratio is still upside-down and we are approaching a $16 trillion note and we are now in a 5-year-old recession.
As controversial as these appropriations were, they are precisely what was recommended by America’s own Nobel prize-winning economist, Paul Krugman.
It makes absolutely no sense to cut government revenue while the private sector is laying off people. The tax cuts do not result in greater employment, but, instead, give way to greater stock performance and executive bonuses. This is a failed policy being played out across Europe. It is predicted that the world-wide recession will not end until 2015-17. The only way to maintain the economy is to follow President Franklin Delano Roosevelt’s policy of infusing money into the economy through governmental projects.
A reported draft of the 2012 Republican Party Platform includes this plank:
NO NEW TAXES, EXCEPT FOR WAR.
“We call for a Constitutional amendment requiring a super-majority for any tax increase with exceptions for only war and national emergencies, and imposing a cap limiting spending to historical average percentage of GDP so that future Congresses cannot balance the budget by raising taxes.”
In other words, the Republican Party is adopting the austerity mentality which is bankrupting Europe as we speak.
It’s 2012. The United States, should it adopt austerity measures, would be subjected to all their negative effects, and those negative effects would prolong the worldwide recession. You cannot cut your way to prosperity. By taking money out of the hands of citizens the economy is slowed down further. Why would any self-proclaimed patriot with an understanding of economics and history choose to turn a blind eye to Eisenhower’s warnings of the growing military industrial complex?
[E]ach proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs — balance between the private and the public economy, balance between cost and hoped for advantage — balance between the clearly necessary and the comfortably desirable; balance between our essential requirements as a nation and the duties imposed by the nation upon the individual; balance between actions of the moment and the national welfare of the future. Good judgment seeks balance and progress; lack of it eventually finds imbalance and frustration.
To reject the words of a great leader and support such a position as “No new taxes, except for war” leaves war as the only way to rev up, and ultimately sustain, the economy.
However, this is how the American conservative mind is framed. Debt is a character flaw and the person who incurs the debt is fully responsible for it. If the person cannot pay back the debt it is because they lack the internal fortitude to do what is necessary to resolve said debt. They are failing not only themselves but all of society since one person’s spending (debt) is another person’s income. Because the metaphor of a household budget is used so often by politicians to explain economic matters, the idea that this does not work for national economies falls on deaf ears. It is counter-intuitive to all the experiences any individual has had.
Hence, the Republican Party has a good chance of being able to sell the idea of austerity measures to the American people. The high cost of “entitlement programs” or the “social safety net” designed following the Great Depression to keep rank and file Americans alive, well, and spending is seen as the weight preventing economic recovery. Those who are struggling to get ahead need a scapegoat for their financial pain. The poor and elderly are marginalized. They cannot articulate their pain as clearly as those with the means to distribute their ideas before the public, thus, the poor and elderly become the electoral scapegoat.