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I’m No Economist, But Some Things Are Obvious |
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Polls and media outlets constantly tell us that Americans are thinking about domestic issues, not foreign policy and Iraq, as though no connection exists between the strength of our economy and our misadventures overseas. But Americans are smart enough to see the source of our current economic downturn.
A Reddit headline says it all: “Bush, the goddamn idiot, is calling for $145B in goddamn tax relief in the middle of his goddamn war.”
In other words, taking symbolic action and calling it strength will not solve our real problems.
The Washington Post breaks down what the tax relief will actually mean:
The principles outlined by Bush opened a path to an agreement with congressional Democrats that could come as early as next week and put as much as $800 in each taxpayer’s pocket by spring, according to both sides.
$800 comes and goes quickly, and as many have pointed out, won’t end up in the hands of those who most need it. And how’s $800 going to help people hang on to their houses? How’s that going to make the dollar stronger? Restore confidence in our economy?
The “stimulus” is a drop in the bucket. The BBC reminds us that $140-145 billion represents a fraction of our economy.
The impact of the stimulus package would be more political than economic.
A stimulus package worth perhaps $140bn dollars will have little real impact on a total US economy worth a gargantuan $14,000bn a year, our correspondent says.
We need deep changes, not bandaids. And a majority of Americans agree on at least a few changes: we can leave Iraq. We can stop the irresponsible government borrowing. We can reduce military aid to dictators like Musharraf. We can end undeserved corporate welfare and no-bid contracts for work that doesn’t get done. Freeing up this money would let us, say, finally balance our budget and pay down a little of the debt. It would also let us help Americans in danger of losing their homes. It could even put unemployed Americans to work fixing our bridges, roads, and levees, before more preventable tragedies strike ordinary, hard-working Americans from Minnesota to Louisiana.
What we don’t need is another opportunity for Bush’s corporate buddies to fatten themselves at America’s expense, sneaking in anticompetitive measures in a moment of anxiety. Don’t be fooled. When you get your 800 bucks, “businesses” (not small businesses, but huge anticompetitive government-allied corporations) will be getting more subsidies.
And now I turn to someone who knows a lot more about economics that I do. Stirling Newberry of the Agonist has a great piece worth reading in full, but I’ll give you a long excerpt. He differentiates relief, restructuring, and stimulus, and suggests how we should handle each area.
In the present circumstances, the best relief programs would be aimed at groups who are dislocated, or who have been dislocated as a matter of course. One of these groups consists of the National Guard and others who have disproportionately born the brunt of Iraq. Relief programs which treat them as deserving of “tax relief” on soldier’s pay, miss the point. The best relief programs would also interlock going forward with restructuring.
This means, ending Iraq. Not sort of renouncing territorial ambitions in Iraq and surrendering to the Republic of Al-Anbar, which, for those of us paying attention, is what just happened - but pulling out of Iraq. This has two advantages. First it is a vast amount of money for other projects. Second, right now the US is the largest single source of economic activity in Iraq. Without US dollars and projects flowing in - to do things that aren’t getting done anyway according to the GAO - there will, one can bet, be a great focusing of minds in Iraq on how to get the oil flowing and on ships.
Restructuring also needs to be aware of a simple fact: namely that a massive bank bail out is coming. Charlie Rangel has already indicated a willingness to do a complete overhaul of the tax structure. One hopes that his preferred candidate is willing to do this as well.
Restructuring also needs to address how we are going to reëmploy the massive glut of residential capital that has been constructed, and how to import less oil and export more goods.
Restructuring would ideally address sources of inflationary pressure: food, health care and energy.
With these pieces in progress, the actual need for stimulus can be examined. This will be far less actual stimulus as such, than would otherwise be needed. The American economy needed massive stimulus this last decade in order to deal with a host of truly astoundingly rotten fiscal priorities. That is, we needed far more deficit spending than would otherwise have been the case. While we should never shy away from borrowing when we need to, and spending what we must, we should always be seeking to borrow and spend the least necessary, not the most possible. It’s better go keep credit good, it is better to keep the money in the hands of the general economy, and it is better for Government to pursue plans that generate enough economic activity to support those plans by the increased tax revenues that come with increased activity. While nominal deficits aren’t to be feared, actually downward spirals in the national debt - where the debt is growing faster than our real ability to pay it back - are to be avoided except in cases where swastikas and rising suns are actually blooming around the world, and not just in the imaginations of the 101st fighting keyboarders.
In short, there’s a set of ideas out there that could seriously address our economic situation, and they don’t belong to George Bush and his clique. We can’t just throw a little money at rich and middle-class people and call that a plan. I don’t think you need to be an economist to understand the big picture. Our foreign policy is sucking our country dry, and our president refuses to acknowledge the writing on the wall. Big checks are coming due - for our dinosaur-era energy policies, and for the Splurge in Iraq (it’s working!). Let’s just hope the situation doesn’t deteriorate too far before we get the goddamn idiot corporate crony out of office, and before he and his buddies turn America into another third world country ripe for profiteering. You thought Reagonomics was bad? Get ready for Katrinanomics.
Nice article, I couldn’t agree more!
However, having less than 50,000 troops in Iraq in anything less than 8 years is a dream.
But, you’re right on about the economic restructuring.
Sadly, you may be right about Iraq.
It’s simple. We can vote for Ron Paul. The rest is taken care of!
I’m pretty sure Ron Paul’s full remedy would make this recession worse, not better. I like his get out of Iraq part, though.
I’m pretty sure Ron Paul has gone senile… or insane. There is no way his policies would work.
What evidence do you have they wouldn’t work?
It never has before.
An why do you feel he will make it worse. How much worse would it be compared to every other candidate who massivly wants to increase the size of government? How old are you son? Did you sleep during Government class in school???
Do you know anythign about the Federal Reserve and the gold standard to our currency? Look how fucked up our economy is because of it. Ron Paul could not make it any worse.
You make worthless hot air statements that you can’t back up. Be specific, or study and educate yourself.
To stave off recession, we need to stimulate the economy. With investor confidence low, simply giving money back to the people will just cause them to horde it. On the flip side, if the government starts spending more money here, on its citizens, cash will reliably flow into our system. It’s fairly simple. See the New Deal for some more examples.
Paul’s idea of withdrawing our military and eliminating the IRS is a very good one. Much of the extra money in people’s pockets will be spent. Not to mention that we’ll stop subsidizing Japan’s oil. (We pay to protect the oil tankers and every other country in the world gets a free ride on the American taxpayer. That needs to end.)
We will be in Iraq for the next 20 years and there will still be an IRS at the end.
Dear Jason: Investor confidence doesn’t go up when the government takes desperate measure to stave off a recession. It goes down. When Apple cut the price of the iPhone by 1/3rd only 2 months after launch, it was seen as a bad sign and the stock went down. Why is this somehow different with the government? You can’t fix a bubble with another bubble.
I don’t know why a non-interventionist foreign policy and a fiscal policy of “hey if we want them to spend money maybe if we didn’t take 30% of it they’d spend that 30%” is “crazy”.
Of course, just about all of our history runs contrary to your theory. The Republican doctrine of smaller government has consistently been not only false promises, but devastating for our economy. Take a look at http://www.americanprogressaction.org/issues/2004/manage_economy.html for some history.
Reality seems to be against you my friend. I’m not against the free market, but if we want to jump start the economy, government spending and government created jobs, all focused inward, seems like it does the trick every time.
I agree, Chris. What has the government done so well that we want it to continue doing it? Nothing. Dept. of Education for instance. War on Drugs…total joke. Social Security and Medicare, raided…gone. The government can’t do anything for you, they can only control you and reduce your freedom, they cannot provide you with a service. You forfeit your liberty and money with nothing in return. Inflation is destroying our 401k’s and savings. If a state secedes, I’m there.
I think Ron Paul would be much more focused on fixing our domestic situation than any other candidate — no one else has the courage to call out the military industrial complex on national television, or provide an honest assessment that our government spending is unsustainable.
A slowdown and recession in the American economy is unavoidable (anyone who thinks otherwise is dreaming), but it is better than waiting for an outright meltdown, which would generally occur under any other candidate’s administration.
I encourage readers to do research on candidates to see who has a solid grounding in fiscal policy.
Jesse..i got one better, check there voting records like for the last 8 years…so you can taste what flavor your next devil people vote in this nov…..lol
This is a nice thought, but withdrawing from the Iraq war will do little more than save some money for the government. That is not the source of this potential upcoming recession.
You are 100% correct, and the point needs to be re-asserted until we pull out.
What I find most troubling is that we are still spending more on the War in Iraq per month than when we were actively fighting in the invasion stage:
http://geekswithblogs.net/starr/archive/2007/12/24/117963.aspx
Government spending has little to do with the overall health of the economy. All of you who think otherwise are very ill-informed. The reason the economy is so poor right now is because of people buying homes they can’t afford, putting expensive purchases on credit cards and then defaulting, financial services companies being leveraged to the hilt in order to reap massive profits from the disappearance of risk over the past few years. The current environment of plummetting stock prices, consumer confidence, corporate profits, and home prices is called reversion to the mean my friends, nothing more. All of the bad money is getting swept out of the system and onto the street. The only thing Iraq affects is the relative size of the deficit/debt of the U.S., not the financial well-being of its citizens.
Yes l agree that Bush has sold Americans down the creek,his actions in the far east have been a monumental waste of your dollars! and have achieved very little. But the worst thing,at least form your point of view is that he has lost sight of the ball in South America! mark my words that chicken will come home to roost in the years to come! Here in the UK, people who have taken holidays in Cuba are talking about what a great country it is , poor certainly but how proud Cubans are of their health service, education and how they did it without America! this is happening all over South America!
l believe that America, founded in freedom free enterprise has sold out to the corporate moguls who stand for the opposite. There is no freedom left for ordinary people, laws are passed that favour the rich and suppress free enterprise….the big boys want a percentage of anything and everything you can dream up!
Your political system is under the same grip, no politician can hope to get elected unless he or she is backed by the same people! Why is it that an American has no choice! you can vote for anyone so long as they are either Republican or democrat! l have watched the primaries on television and groaned at the candidates. what choice do you have the one as bad as the other.l cannot believe that those chumps represent ordinary Americans, l have met Americans working over here and none of them are as hopeless sounding as the candidates in your election process. without taking sides l would say that Ron Paul is the only one who seems to speak the truth! and l favour the Democrats?
Every American should read George Orwells book 1984, in he said “In times of universal deceit, speaking the truth is a revolutionary act”
This is not a matter of Iraq. While spending money on the war certainly doesn’t help the fiscal account balance, the fact is that this recession is going to be led by the consumer and the excessive leverage incurred in the past 5 years.
It took the US consumer 5 years to double the debt to income what it took us 39 years to do originally.
Consumer led recession has nothing to do with the war…nor administration spending policies (as misguided as they have been)…
In fact, since 1945 there have been 3 times where we have avoided a recession with housing starts, building permits and the LEI year over year index negative. 2 of those times were the run up to the Korean Conflict, the escalation of the Vietnman War and then the aggressive monetary stimulus provided in 1995 (the one and only fabled soft landing). Therefore, one can actually argue that the US Military Industrial complex actually can HELP us come out of a recession…however, the percentage of GDP that the US Government actually makes up today is less than it did in the 1950’s and the 1960’s…
Please thing before posting these things…it’s horribly inflamatory and uninformed at best whether or not you agree with the war or not…which I don’t personally, but notion that stopping the war in Iraq will help us avoid recession is entirely incorrect.
Ramblin Wreck is right.
At this point, unfortunately, you may be right. Recession was coming for a while now, yet nothing was done. But in order for our stimulus to do anything more than shore up the economy in the short term, money pits like the Iraq war must be eliminated. There’s no other way to be stable in the long term.
Simply walking away from Iraq for money would just as immoral as going to war in Iraq for oil.
I appreciate your moral concerns, but I felt that the case had been made so effectively, and so often, elsewhere, that the war is wrong, that it did not need to be repeated here.
But I’ll say it again: the war was wrong and is wrong. Morally wrong. And military successes in Iraq have not brought about political progress; in fact, our presence there impedes that progress. We need to leave for thousands of reasons, including moral - and, yes, economic - reasons.
IS this not the reason behind the Ron Paul Revolution?
I can’t see why so many people still don’t see it.
This isnt about 1 man, or 1 religion, or 1 race. Its about 1 idea… lets share it .
Kevin says :: January 22nd, 2008 @ 1:33 pm
IS this not the reason behind the Ron Paul Revolution?
WOW, whew thank you Kevin, I haven’t had a good laugh today. That was good.
Are we in that bad of shape that we would even consider Ron Paul ? That’s just sad.
So the US gov will borrow money to pay a tax break for US citizens.
They will give each of them $800 the borrowed off the chinese.
You already each owe about $300 to the chinese just for this war, and now the gov says, hey, we’ve decided we like to borrow more money, and let you spend it to further inflate our economy so it doesn’t crash until I can get out…
Things are much more ‘obvious’ to a person when they are born of (often erroneous) preconceived notions and colored by personal bias that is frequently so blinding as to overwhelm objectivity. I’m glad I live in a different world than the one being described above.
I hope yall are voting for Ron Paul - but - wait - are you wasting your vote? What the hell does wasting your vote mean? It means NOTHING. Think about it - General Electric News tells you that by voting for Ron Paul you are throwing your vote away - so you vote for the General Electric News candidate thereby placing them in office.
Think for yourself - vote for Ron Paul and you will see this country move into a new golden era - I wonder where that term came from? Don’t listen to the bullshit - make up your mind and go in there and cast your ballot - let the election be the final word on how each vote matters.
Hillary, Obama - the rest - if they get in we’re going into Iran. If you have kids you’d better think about that one long and hard and imagine their screams as they bleed for nothing in the future war.
I’m glad, as well as relieved, to learn more about Ron Paul. All this time I had thought it was RuPaul running for President…
At any rate he sounds like the most impressive of all the candidates, the only one with a sensible economic plan, which makes me think he has the least chance of winning. Americans unfortunately are still prone to buy whatever they hear from politicians who spiel promises out both sides of their mouths rather than really listening to the straight talkers like Paul…Ron Paul, that is.
An excellent, excellent article. Unfortunately, though, as others have said, I don’t see the US getting out of Iraq in any significant numbers any time soon, and I don’t see any real political will to grasp these issues by the throat. So the inexorable slide towards implosion will continue.
I agree your not an economist. The things you mention may be good to do (I do actually agree with you) but it is not how to avoid a recession.
If you reduce government borrowing you will will make the recession worse
Leaving Iraq will do nothing to boost the US economy (wars are often good for the economy)
Holy shit are you clueless. Google a Laffer Curve numb-nuts and then Google fallacious arguments so perhaps you can avoid making a fool of yourself. What do they teach in college these days?
Great idea, let’s leave Iraq immediately and abandon those who are creating a pluralistic, representative government to the tender mercies of Al Qaeda and thereby surrender a resource rich, strategically important keystone state to the forces of intolerance and religious fanaticism.
Another brilliant idea is to abandon Pakistan and their nukes to God knows what. All our billions in aid are pennies on the dollar compared to what even a small nuclear exchange between India and Pakistan would do the world economy.
Not only are only not an economist you’re barely sentient. Wake the hell up.
El Duderino, while I respect your right to share your views here, personal attacks are not permitted. Consider yourself warned.
You’ve CLEARLY never taken an economics course.
Even as a huge liberal…
while I think many of his policies may have far reaching implications, the truth is Ron Paul’s stimulus package is by far the most coherent, and would get our economy a jolt in the ass that it needs.
ronald reaguns debt./3 trillon..fast forward to g.w. bush 36 trillon…is this ron paul guy a wizzard?..who ever wins in nov. were still cluster fucked.
The remedy for an economic downturn caused by too much debt = create more debt? Isn’t that the sine qua non of magical thinking; repeating an action ad infinitum and always expecting a different result?