In the first part of this three part blog I asked a question: What kind of country do you want to live in, big government or small government? The answer, of course, is that it’s not a matter of choice, but really a matter of this is what we have, how do we make it work? I know there are people out there who want small government but that is just an impractical idea, given the size and international importance of this country. There is no realistic way to make America a small government country. Not if we want it to continue to be a world leader. So let’s look at some things we can do to make it the best big government country imaginable.
To do that I think we have to look at three monster problems that right now are sucking all the air out of the country: unemployment and the deficit and credit.
I am in agreement with many conservatives that deficits are one of the most destructive elements of any government’s economy. Money paid to debt service is money thrown down the sewer. Our 2010 Federal Budget saw us throw away $164 billion in interest payments on the national debt. That was up 18% over 2009. That’s tragic but right now it is not even our biggest problem.
Right now our biggest problem is that 9% of our people are out of work and another 9% have stopped looking for work. That is much more important than any debt, because a nation with high unemployment cannot repay its debt no matter what it does. When 18% of our population isn’t able to work, isn’t able to pay bills, isn’t able to eat or heat their homes, isn’t able to partake in the American dream, they also aren’t able to pay taxes and thereby help to reduce that monster deficit.
It’s all a big circle, people don’t work, people don’t earn money, people don’t buy things, business suffers and people are laid off. The government no longer collects taxes from the affected people, it must now pay out money to support those people, first for unemployment insurance and later for welfare. Instead of helping to reduce the debt, those same people are now adding to it.
So what’s the solution? Put people to work, let them earn a wage on which they pay taxes and have those taxes go to pay the national bills and at some point reduce the deficit. But how?
Right now there are two principal solutions on the table. One is the Republican solution, which is to reduce taxes on the very rich with the expectation being that the money the wealthy save on taxes will “trickle down” because the money the rich save on taxes they will spend to start new businesses, that will in turn, employ new people.
The other solution is the Democratic solution, which is to ignore the deficit temporarily and pump money into job producing areas that will not only create new jobs but will also help the country in other ways that are tied to the creation of those jobs.
Both potential solutions have histories by which they can be tracked. The pump priming solution of the Democrats was used to great advantage by Roosevelt with the creation of the WPA, the CCC and like organizations as a way to help pull us out of the great depression. Not only did it put many people back to work, it helped to create great infrastructure all across the country, from the roads and bridges of the Northeast to the great dams of the West.
On the other hand, Tickle down economics, as introduced by Wendell Wilke and later reintroduced by Ronald Reagan has, for over seventy years, failed to prove its point. Cutting taxes for the rich has never resulted in more jobs because the rich just don’t use their tax savings to start new businesses. New businesses aren’t created by rich guys who happened to add a couple of million in profit last year and are stuck for a way to invest it. That’s not how it works. New businesses are created by inventive people, possessing new or better ideas, not by rich guys looking for something to do with their excess money. The rich guys already know what to do with excess money and it rarely has anything to do with taking a chance on a new business.
I was brought up in a strict, conservative philosophy, which held that one should never borrow money because paying interest was like throwing money away. That has been somewhat mitigated of late by certain individual tax advantages, but those advantages don’t apply to the government so where it relates to the government my philosophy still stands. But sometimes there are better ways to achieve an end than going in a straight line. This, I believe, is one of those times.
Every program we cut in order to save money puts people out of work, reduces taxes paid, induces unemployment payments and puts a bigger burden on what little money the Federal Government has to work with. The more we cut the further we will sink into the hole until we get so far in we won’t be able to see the rim.
On the other hand, there has never been a better time for the government to borrow money. Interest rates are almost zero. The Republicans screamed bloody murder about the money spent by Obama in trying to help us claw up out of a recession they caused but that money was mostly spent, as it had to be, because of the emergency nature of the situation, on unemployment insurance to feed people who had lost their jobs.
Right now we should be doubling down on that money and sinking a huge amount into infrastructure creation and repair, creating thousands of jobs that will allow their holders to pay taxes and help reduce the debt.
In order to do that we must be able to pass legislation through the house that will enable the president to spend the money that needs to be spent without getting the ultra-conservatives all bent out of shape. By holding the House captive the Republicans are in a position to wreak havoc with our entire economy. Somehow a way must be found to extend the debt limit without giving in to the destructive demands of the right to butcher entitlements and hold the line on taxes.
Fortunately, we are already seeing signs that the public is getting wise to the Right’s destructive positions on Healthcare, Medicare, education and taxes. In a recent poll 64% of registered Republicans admitted that we have to raise taxes. It seems only those in congress and their lobbyist friends don’t see the light. Without a serious rethinking of their current position they will see the light next November. They just won’t like what it exposes when it shines on them.
But nothing good is going to happen if we are not able to get together before November 2012 on a way to create more employment and at the same time make an attempt at reducing the deficit.
The Republicans blame the current administration for all existing problems regardless of the source of those problems. They seem to have forgotten that Obama inherited his biggest problems, two wars and a trashed economy from George Bush and the same Republican congressmen who are now whining about them. Two months into Obama’s administration the Republicans were screaming that the problems were now his. That’s ridiculous, the problems are always ours and we need the government to help us solve them.
After their 2010 election victory in the House, the Republicans thought they had a mandate; that the American people had completely bought into their solution to all the problems that were plaguing the country. What they didn’t realize was that it wasn’t a mandate, it was just impatience exhibited by the people who had elected Obama and were not satisfied with the speed with which he was fighting his way through the morass of problems that he had inherited from the Republicans who had caused the problems and were now blocking the solutions.
So because they thought they had this mandate, the Republicans and their Tea Party friends/enemies just vomited out every dumb, impractical, damaging program they had ever conceived, the worst of which was the repeal of healthcare. They knew they had no chance of passing this bill but they shoved it through the house anyway just to make a statement, which only proved what a bunch of harebrained losers they are. The statement backfired and now they are faced with the prospect of having to eat it without condiments. Up until now senior citizens have been the backbone of the right wing but now all these seniors have come to realize that unless you’re a rich senior, the Republicans don’t give a damn about what happens to you.
It took a lot of real dumb moves by the Republicans, including the Ryan budget, but finally middle America is getting a look at how little the Right cares for anyone but their own rich selves. Now it behooves the Democrats, not a particularly bright group themselves, to grab the reins and lead this team of horses down the right path to the elections and hopefully to a plan to get America back on the right track.
It would be a lot easier to do that if the people who are benefitting the most in this economy did something to help alleviate the problems of this economy. I am speaking of the bankers who through greed and stupidity allowed, even helped, the recession to happen.
Unfortunately Treasury Secretary Henry Paulson was so cowed by the threat of the entire economy crashing, that he didn’t demand written stipulations on the TARP loans, insisting that the bankers, who had caused the problem, use the money, that in some cases was being forced on them, to create small business loans. The banks are still refusing to give out any significant number of small business loans. If they would start using the trillions of dollars they are holding to create small business loans, the government wouldn’t have to be the one to step in to finance projects that would help the country.
But why aren’t the banks lending? Very simple, the interest rates are too low for the banks to make the huge profits they need to guarantee their enormous bonuses. So they hold onto their money, even though it was money given them by the government to supply those loans and they invest it in ”financial products” that will pay a higher rate of interest than the small business loans, which are necessary to get the economy moving. In not providing credit the banks are doubling down on the damage they have already caused by their criminal handling of the mortgage and insurance crises and proving beyond a shadow of a doubt that they are interested only in big bonuses and big yachts. What’s amazing is that these so called financial geniuses don’t understand that the next time the economy crashes it will take them down with it, just like it did Lehman Brothers and Bear Stearns the last time.
If there is one group that has abandoned the principles that have made our country great it is the bankers and Wall Street. No longer satisfied with too much, they now want it all. It has, therefore, become the responsibility of the rest of the country to give them what they want and then take it back in taxes. The only advantage the middle class and the poor have over the rich lies in their numbers, massive numbers, and it behooves them to use that advantage by not voting for any politician who will not swear to raise taxes on the rich and to restructure the IRS code and bring it in line with a fair allocation of wealth.
So far we have spoken about what kind of country we have and what we have to do to make it work. I think it’s pretty clear that we have a big country with big goals and big expectations and there is no way we can shrink it to accommodate the needs of the small government people, so I will, in the next part, deal with the reality that exists. In the end it all comes down to limiting spending, cutting costs, eliminating fat and raising taxes, the ways we approach each and how we balance them will be the key to our national susvival.