OK, this is what I’ve been able to glean about the American economic problem. Any and all critiques are welcome. (Stay respectful, please.) I’m far from an expert, and this is a work in progress.
So here’s the basic problem right now: demand. Remember, everything in economics can be boiled down to supply and demand. Right now, there’s plenty of supply – corporations are making record profits, and there is no shortage of products and services out there. But we don’t have enough demand – consumption – people buying stuff. Customers. Ask any business why they’re not hiring, and their number one reason will be “Not enough customers.” It just wouldn’t be a good investment to build more and hire more for customers who just aren’t there.
We used to have enough customers. In the Bush years, Americans were propping up the whole world economy with their consumption. In fact, they were consuming more than they had -- the average savings rate (savings minus debt) for American households was below 0%. Now it’s around 5%.
Obviously, that’s a good thing for these individual households. But it’s not good for the economy as a whole, because it means less demand. If this seems messed up, consider the basic economic principle called the “fallacy of composition.” It says that what is good for an individual is not necessarily good for the whole. The analogy I read is of someone standing up at a football game. It means a much better view for that person. But it means a worse view for everyone else. Then everyone else has to stand up, and let’s face it, standing up stinks. Sitting is where it’s at. I’m a champion sitter myself.
Point is, the American economy was a castle in the sand during the Bush years, fundamentally unsound and propped up by unsustainable American overconsumption. A lot of that overconsumption was based on all of us banking on our wildly inflated house prices. Sure, the prices seem high, we all said, but real estate is a perfect investment! Prices will climb and climb forever, until each house is worth ten billion dollars and we’re all ten-billionaires! Wheeee!!!!
So maybe we were all a bit dopey in all this. And many have blamed people who bought subprime mortgages for this whole mess. In fact a tirade to that effect is often credited as sparking the Tea Party.
In one his routines, Lewis Black had a good comeback for that. He said, OK, let’s say you’re struggling to pay your rent. And then someone comes up to you and says, “We know you can’t pay your rent – how about a house?” Would you honestly say no? What do you have to lose?
Black then cited the Tea Partiers who complained that these folks didn’t even read their mortgages. Black’s response was “Who the hell does?” It’s written in a foreign language called lawyerese, and the average person simply does not have the training to understand it. Maybe everyone should have enrolled in law school before signing their mortgages.
No, it’s ridiculous to blame the victim here. There are many other institutions that should have known that giving people sub-prime mortgages wasn’t only a bad idea for the buyer – it was a bad idea for the seller. So let’s find some villains! Here are some nominees.
Wall Street
Wall Street, of course, is seen a huge villain in all this. It provided the demand for sub-prime mortgages by turning them into allegedly AAA investments. The short version is that they did it because they got huge rewards for doing so. So they were greedy.
But blaming Wall Street for greed reminds me of Chris Rock’s reaction when that tiger attacked either Siegfried or Roy (I can’t remember which). Rock said “Everyone’s saying the tiger went crazy. That tiger didn’t go crazy! That tiger went tiger!”
I’m not saying we shrug our shoulders and say “well, tigers will be tigers” – far from it. I’m saying we have to make sure the tiger is kept in a cage. You can complain about Wall Street greed all day, but it won’t change unless we force it to. And we force it to change through regulation.
Wall Street is a simple animal that works according to incentives. Only government has the power to change its incentives such that it makes less money doing things that hurt people and more money doing good things. Believe it or don’t, Wall Street can and does do a lot of good things: everything from investing in startup companies that can someday employ millions to getting a solid return on a union worker’s 401(k).
So the Dodd-Frank Act, passed in 2010, is crucial. It puts a lot of restrictions on the entire financial sector, ones that were sorely needed before the crash. And, by the way, many were in already place before the anti-regulation movement cut a swath through them in the ‘80s, ‘90s and ‘00s.
Americans were mostly not paying attention or were supportive of these cuts in regulations. And if Republicans had their way, they’d not only repeal Dodd-Frank, they’d cut even more regulations. Regulations prevent businesses from doing their magic, they say, and thus hurt the economy.
I look at regulations like traffic laws. They prevent accidents from happening. Sure, there may be a regulation that isn’t working, just like there might be a stop sign that is unnecessary. So you pull that one out. But to just assume that regulations are inherently bad and have to be chopped away is like saying “let’s just cut out 30% of all traffic lights.” People might get places a bit faster, but there will be a lot more accidents. It won’t be worth it in the long run. Short-term gain, long-term pain.
So is Wall Street a villain here? Yes, but we need to take responsibility too. Wall Street is an animal that feeds on money. It’s our job, through the power of the government, to discipline that animal, to keep it from peeing on the rug and instead shape it into a good hunting dog (… and I think that strains the analogy beyond its breaking point).
The Banks
One regulation that really would have helped lessen the impact of the Great Recession, by the way, was the Glass-Steagall Act. It was enacted in 1933, during the height of the Great Depression, and separated investment banks and deposit banks. It was repealed in 1999. Unfortunately it’s not part of Dodd-Frank (it’s now known, in a slightly different form, as the Volcker Rule), but man oh man, it would have been nice.
Think about what this means, to have deposit banks and investment banks separated. Under Glass-Steagall, you made a deposit and the bank used that deposit for loans. The bank could not take that deposit and then invest in collateralized debt obligations or hedge funds or Ponzi schemes. Basically, it means that your deposits are safe from the crazy highs and lows that come from risky investing.
Since the law was repealed, your life savings were indeed being used to invest in subprime mortgages and Bernie Madoff’s super-genius can’t-fail get-rich-quick no-need-to-look-at-the-details scheme. And when those investments collapsed, the big banks were about to collapse themselves. That meant your life savings were at risk.
The bailouts were the only option. Yeah, I said it. In fact I’ll kick it up a notch: the bailouts were good. Yes, they make us all feel icky. They seem so wrong. These fatcats were rewarded for being failures. The bailouts definitely could have been better structured so as to not let those people off so easy.
But the bailouts also protected the life savings of almost all Americans. Granted, these banks were FDIC, meaning that deposits are insured by the Federal Reserve. If your bank collapsed, the government would have just given you everything you had in the bank. But here’s the thing: That would have been WAAAAAAY more expensive for the government than the bailouts were. Much, much more.
And the government would not have gotten that money back. But it did get all the money back from the banks, plus interest. The government actually made quite a bit of money on the bailouts. Anyone who thinks the government should behave more like business should love the bailouts. The government took a huge looming loss and turned it into a gain.
But that’s all secondary to the fact that when banking collapses, you have a very, very big problem. That’s Great Depression, 25%-unemployment territory, the kind of stuff that would make our current situation look like the cries of a rich boy who can’t afford diamonds on the soles of his shoes.
We all hate banks, of course, but their core purpose is a vital service: They take our deposits and use them to make loans. If that same money was under the mattress, it would not be used to make loans. That means fewer loans, fewer businesses starting up, fewer cars and houses being bought – a lot less economic activity, period.
Think of that scene in “It’s a Wonderful Life” when everyone tries to take their deposits out of the Bailey Savings and Loan at once. What does George say in his adorable stammer? “I can’t give you your money, Bert, because it’s in Bill’s house!” (I’m paraphrasing.) Banks don’t keep all our deposits in a pile in a back room. They know that under normal circumstances, not everyone will need a withdrawal at the same time, so they can use a lot of that money to help others invest.
What George Bailey was trying to prevent was a “run on the banks,” and it happened all the time in the Great Depression. It made a bad situation much, much worse. But during the Great Recession, there were almost no runs on the banks, and we have the bailouts to thank for that.
On the other side of the street from George Bailey, there’s Mr. Potter. Mr. Potter doesn’t care whether banks are used to do good things, like enable an adorable (and admittedly, slightly stereotypical) Italian family to buy a house of their own. He’s all for destroying whoever he can in the pursuit of profit.
Right now, all bankers seem like Mr. Potters. That doesn’t mean we can get rid of banks though. And it doesn’t mean that we should just yell at them until they all transmogrify into George Baileys. What we need are regulations. Things like the Volcker Rule/Glass-Steagall Act would ensure that banks can never gamble our life savings on the next Bernie Madoff.
So how about banks as a villain? Once again, “yes, but.” Banks are necessary, even more so than Wall Street. But they need to live according to a lot of traffic laws, or they will pee all over the place. (Mixed metaphor and double callback! That’s a rare rhetorical feat.)
The Federal Reserve
The Federal Reserve, by the way, messed up big time during all this. The Fed’s job is to be a killjoy, deflating bubbles by raising interest rates. When house prices were rising so fast, they should have raised interest rates, encouraging fewer people to buy houses, and thus calming things down. It didn’t, because Greenspan was as deluded as everyone else into thinking the old rules had gone out the window. Turns out they hadn’t. Oops.
People on both sides of the political spectrum have been calling for the end of the Fed, but the truth is that that is a terrible idea. If it had been managed like it was supposed to, the Fed could have made things a lot better. It just got caught up in the fervor of right-wing economics, and lost its way.
Every developed nation has a central bank. It needs to for many reasons, only one of which is to change interest rates to smooth out the highs and lows of the economy. It also keeps inflation in check by controlling the money supply. If you think things are bad now, try living with the kind of hyperinflation seen in Germany in the 1920s or Argentina in 2001. People literally had to return to a barter system. Let’s not do that.
I don’t know if the Federal Reserve even really counts as a central villain—it’s more like one of those parents who try to be “cool” by buying beer for a bunch of teenagers. The Fed was supposed to be the grown-up in charge, but it had some crazy notion that it didn’t need to be. The Fed definitely deserves some blame, but in the end, it was those kids who drank the beer. (Each section of this must end with a strained analogy.)
Income Inequality
OK, so enough about the villains. They provided the spark that lit the fire, but there are deeper problems with a very flammable foundation. Moreover, we haven’t heard about demand for a while. There just isn’t enough demand/consumption/customers/people buying stuff. Why is that?
Well, here’s one reason: Too much money is concentrated in the hands of too few. Among all the countries in the world, we are at 93rd place in income inequality, according to a CIA report cited in this article. There isn’t enough demand in our economy because there are only a few people with enough money to be customers, and they, no matter how hard they try, simply can’t buy enough by themselves to keep the economy afloat.
Put another way: One man can only buy so many steaks. If you have a reasonably balanced economy with a strong middle class, there will be plenty of customers at your steak emporium. If only the rich can afford steaks, then forget it, you’re going under.
Yes, the wealthy still spend, a lot. But proportionately speaking, they spend less on consumption and more on investment. You give ten bucks to a rich person, and she might buy a steak, sure. But she’ll more likely put it toward an investment. You give that same ten bucks to a middle-class person, and she’ll go buy something. Once again, consumption is what we need right now, so the latter is preferable.
But investment is far from worthless, you might say. The wealthy invest in companies that then go create wealth, right? Yes, sometimes. And that’s good. But they are just as likely to invest in credit default swaps or currency trading or some other complex instrument that are really just bets with other rich people, and do nothing but slosh money around among the moneyed classes.
It’s a matter of bang for the buck – right now, a buck will create more economic activity in a middle-class person’s pocket than in a wealthy person’s pocket. Maybe if there were a crisis of a lack of investment capital in this country, the tables would be turned. But that’s just not the situation – there’s loads of investment, but not enough demand. You can invest in a zillion companies, but without enough demand, who is going to buy their products?
Note that I’m really concentrating on overall economic health, not necessarily arguments of fairness or compassion. I do believe in such arguments, but I’m ignoring them here because they tend to be a dead end. You can argue to an economic conservative until you’re blue in the face about how unfair it is that the middle class is struggling so hard, and that person will give the boilerplate answer that he/she gives for everything, which is “cut regulations and cut taxes on the wealthy!”
Right-Wing Economic Theory
This gets at the ridiculous fallacy of “trickle-down economics,” which has been disproven over and over but still persists to this day. Republicans now call the wealthy “job creators,” implying that whatever is good for the wealthy is good for jobs. The middle class would thrive again if we just cut regulations on businesses and lower taxes on corporations and the wealthy.
Cutting taxes and regulations would give more money to the suppliers, the corporations and rich people. (Hence the term "supply-side economics.") But they are already sitting on loads of cash – corporate profits are at all-time highs, and the rich are richer than ever. And they’re not hiring. Why, because they’re evil? No, because there isn’t enough demand to warrant more hiring. So we solve that by … giving the suppliers even more cash? How would that change the demand problem?
As it stands right now, the wealthy are not the job creators. The middle class are the job creators, through their consumption. The wealthy are the wealth creators. Those are often two very different things.
Yes, if you cut taxes on the wealthy, they certainly do get wealthier. Sometimes that gives the illusion that the economy is stronger, just because the rich have gotten richer and thrown the averages higher. But the average American does not get a trickle.
You only have to look at the numbers to see that this is true. Since the 1980s, average wages for middle class folks have stagnated. Nothing has trickled down. Meanwhile, incomes for the wealthy have shot up dramatically. The aforementioned income inequality has been created, or at least greatly exacerbated, by right-wing economic theory. (Once again, see this great article for the numbers.)
The Free Market
Well, a right-winger might say, that’s just how it goes with the free market. And there’s the other central fallacy in economic conservatism: that we are fundamentally a strict market economy, and that whatever the market wills, is right. Woe be to he who questions the will of the market. The market is all-powerful. Submit or be destroyed.
Of course, we would be insane, and more than a bit amoral, to completely abandon our sense of right and wrong and instead live completely according to the vicissitudes of markets. And we don’t, by the way. Michael Moore had a great comeback for this argument: OK, so if the invisible hand of the market always yields the best result, why don’t we all sell crack? There’s definitely a market for it. There’s profit to be made. Answer: Because it would be wrong. The market does not make right.
Capitalism is not a perfect system. It’s a good system, perhaps the best ever. But like anything, it needs checks and balances to keep it from doing terrible things. Just as no one person should be given all the power, no one ideology should be either.
The reality is that ours is not a strict market economy – we have what economists call a "mixed economy," as does every other developed nation. We have a mix of market forces in some realms and government forces in others. It’s always a struggle to figure out what should be controlled by the government and what should be controlled by the market, but we have to continually strive to find the right balance. Each thing has to be judged on a case-by-case basis as to whether it’s better done by the public sector or by the private sector.
Government
Say what? The government can do some things better than the private sector? Yes, I know, it’s fashionable these days to assume that the government is bad at everything. Congress is frustrating, so therefore all government is useless and incompetent. That’s a little like disliking the current CEO of GM and thus despising all cars they’ve ever made.
Libertarians and the Tea Party in particular will tell you that the private sector should do almost everything that the government currently does. Tim Pawlenty even had a “Google test” which said that if you find a company on Google that can do something the government does, then that company should so it instead. So I looked in Google and found Blackwater (actually, like a bunch of weasels, they are now hiding behind a new name, Xe Services) and I asked Tim if we should abolish the military and replace it with these guys. He never responded.
Truth is, there are many things that the government does much better than the private sector ever could. In fact, most of the things the government does fall into this category – they were only given over to the government in the first place because the private sector wasn’t doing them well. (Americans have never been too hip to giving the government control over anything unless they’re desperate.) Let’s look at a few of those:
Social Security: Think about Social Security for a minute. The government forces you to invest in their retirement plan. Nowadays, people are getting their panties in a bunch about the tax penalty in the Affordable Care Act for not buying private health insurance – what about a system where the government forcibly takes money out of your check to go into its own government-run insurance plan? Isn’t that a thousand times more oppressive, in theory?
Thing is, theory can go to hell, because Social Security works, and works unbelievably well. Without Social Security, 46.8% of seniors would be currently below the poverty line. With it, the percentage is 8.7%. (Here's the reference.) Sometimes, you have to forget about philosophy or dogma and look at what works. Pragmatism: That should be the new rallying cry. Find out what solves the problem, and do it.
Roads: Bit of a switch from Social Security, I admit, but I wanted to give a range. Imagine for a second that roads were controlled by private companies. There would be tollbooths everywhere, probably every place a road owned by one company stopped and a road owned by another started. Let’s say there was one road you had to take every day. The company owning that road could charge whatever it feels like, and you’d have no choice but to pay. There would be all sorts of little monopolies like that, and there are few worse things for consumers than monopolies.
Business Regulation: Ah, monopolies. We haven’t had them in a long time, not since the trusts of the Gilded Age 100 years ago. You know why we haven’t? Is it because businesses don’t want to?
Yeah, right. Any business would love to be a monopoly. Guaranteed profits, no competition, and you can charge whatever you want. If not for government intervention, through anti-trust actions and the threat thereof, most industries would eventually become monopolies.
Lest we forget – it almost happened to computers in the mid-‘90s. Microsoft was engaging in monopolistic practices, like refusing to put anyone’s browser on their operating systems except Internet Explorer. Look at your computer now. You might notice several browser choices, each getting continually better through the power of competition.
As an aside, I’m reminded of an ad I saw on Facebook recently exploiting Steve Jobs’ recent death. It said that he never took a bailout, and he created some of the best products ever, so therefore bailouts are poopy. Except that he did take a bailout – from Microsoft. In an attempt to fend off anti-trust charges in 1997, Microsoft infused $150 million in its only competition, Apple. Apple would have collapsed without that money. Imagine: None of your precious IToys would exist if the government hadn’t intervened in the economy.
Anyway, we all know that competition is a crucial part of a market economy. But if that market economy isn’t sensibly regulated, competition will be stifled. So a certain amount of government regulation of the economy not only helps the consumer – it also keeps unchecked capitalism from destroying itself.
On top of all that, monopolies are also bad for innovation. Who would ever want to rock the boat by creating new stuff, if the old stuff has a huge, guaranteed profit margin? And if anyone else tries to create a better mousetrap, you’re powerful enough to crush them.
Granted, antitrust actions are just one small part of business regulation. But we already talked about regulations on banks and on Wall Street, and how many more are needed. Overall, in the past 30 years, we’ve gone too far in deregulating the economy, and we need to draw it back. That might mean cutting into corporate profits a bit. It might give companies a lot of annoying red tape that makes them feel sad. But trust me, they can afford it right now. And it’s a small price to pay for the sake of economic stability.
Public Education: Right now, we need college-educated people more than ever. It’s very hard to get a job without a college education. But education costs are going up dramatically, largely due to cuts to public schools. That clearly needs to stop.
But wait, that means more government spending! I know, I know, government spending is evil, especially when it gives a teacher enough to live on. Especially when that teacher then teaches a number of people who go on to create innovative companies that employ thousands. You can’t trust government to do anything right, eh? Ha, ha, ha.
Point is, the middle class depends on government support to survive, through the medium of cheap education. Get rid of public schools and we’d be like a third-world country – only the rich and the super-talented middle class/working class would be educated at private schools. Some other middle-class parents might be able to scrimp and save and send their kids to a private school, but many, many others simply wouldn’t be able to. Education levels would plummet, and with it, our economy.
I’m reminded of one student’s response to the Occupy Wall Street movement. He argued that he worked full-time at a fast food place, chose an inexpensive school, studied extremely hard, got scholarships, and was able to make it. So therefore, so can you. Stop whining.
This kid was obviously exceptional in every way, except perhaps perspective. Cuz see, the thing about exceptional people is that they’re the exception. They’re the A students who will always find a way to succeed. But if only the A students can go to college, we’re back to that third-world economy where very few people get educated and we have a huge disparity of wealth and economic stagnation. We need a system where the B and C students can at least gain some small measure of success.
So education shows that you can’t have much of a middle class without some redistribution of wealth. Look around the world if you don’t believe me: Where is public education cheapest? College tuition is almost nil in countries with strong middle classes, like Germany. Where is public education weakest? Pakistan comes to mind. Pakistan is our wonderful beloved ally and of course always has our best interests at heart and etc., but we don’t want to be Pakistan. (Here’s a good article talking further about how Pakistan would represent a dream country for Tea Partiers.)
But isn’t redistribution of wealth socialism? Well, let’s be clear -- straight socialism would be a disaster, with little incentive to engage in economic activity at all. Capitalism needs to be harnessed for its benefits – providing incentives for people to work, to innovate, to sell. But “harness” is the operative word there. Capitalism, without some carefully controlled measure of wealth distribution, leaves a few people rich and everyone else poor. Then you don’t have enough consumers, and it all falls apart.
Learning from History
All this so far seems a bit theoretical, and while theory is important, I think it’s just as important to see whether a theory has actually worked. That’s the pragmatism that I think we need a lot more of in our politics. We need to frequently use the phrase “OK, that sounds good in theory, but what works in practice? Show me the evidence.”
We already looked a little bit at what works in other countries – but this is America! We don’t like to think about other countries. Let’s look at our own recent history instead.
Our economy was strongest in the 1950s and 1960s. Remember those days? All the men looked like Don Draper, all the women had vacuum cleaners that provided them with instant and complete contentment, and the marginal income tax bracket for the highest earners ranged from 70-90%. Wait, what?
It’s true. Look at this if you don’t believe me. Nowadays, the highest bracket is 35%. The lowest bracket has also fallen over time, but not nearly as dramatically. At this writing, taxes, as a percentage of GDP, are the lowest they’ve been since 1950. And since 1950, though, two huge programs were added: Medicare and Medicaid, which together comprise around 30-35% of the federal budget and are constantly growing.
Americans love to whine about taxes, and try everything they can to evade them. But the fact is that we have one of the lowest income tax burdens in the developed world. Our corporate tax rate, granted, is one of the highest, but most every company finds a way to avoid that. Both tax codes are riddled with breaks and loopholes that are often useless and counterproductive.
But we don’t want to become one of those high-tax developed nations, do we? Aren’t they oppressive socialist systems that crush the entrepreneurial spirit? Actually, no. Demark, Sweden, Belgium and France have the highest individual tax burdens among developed nations, all above 45%, according to the Heritage Foundation. All have strong industries, plenty of entrepreneurship, high standards of living, and thriving democracies. None need a bailout – in fact, they’re the ones giving them out.
The United States, meanwhile, has an average tax burden of 26.9%. And a large part of that goes to our military spending, which is more than all other countries combined. You know, maybe our federal deficit isn’t the result of an evil, wasteful government – maybe we’re starving it. Maybe it’s our fault for demanding services and then refusing to pay for them.
But I think I’ll close that can of worms and move on to some other things that the 1950s and 1960s had that we don’t have now. Union membership was much higher in those days, and it helped ensure livable incomes for the middle class and working class. And then there was the G.I. Bill, which gave veterans free education. And besides that, public colleges were much, much cheaper, with subsidies to public institutions being much higher.
What does this add up to? Those days had higher taxes, stronger unions and cheaper education. They also had a much larger, stronger middle class. And let’s say it all together: A strong middle class means more customers.
Now for a historical counterexample: The Gilded Age, around the turn of the 20th century. Capitalism was even more a religion than it is now, and its main prophets, your Rockefellers and Carnegies, made incredible amounts of money. Then, the government didn’t dare intervene in any way. Sounds like a Tea Party heaven.
It was called the Gilded Age and not the Golden Age because it was only golden on the surface. Underneath the glitter of the Rockefeller lifestyle, you had slums with no sanitation, filled with people who lived on starvation wages from factories. If you didn’t work that day, you didn’t eat.
That meant lots of money for the companies – cheap labor! No health benefits! Business boomed. And little to no regulation meant that companies were free to create monopolies, and control the system further.
Of course, unions and anti-trust laws came along to battle this – but even on its own terms, this system didn’t work well. It may have grown fast, but only for a few. And moreover, it just wasn’t stable. There were economic panics every twenty years or so, culminating in a great Depression. When power is in the hands of so few, one mistake by one of those powerful people can send markets into tailspins and destroy the livelihood of millions.
After the depression and the war, in those lovely 1950s and 1960s, we had the best run of stable economic growth our country has ever seen. Government was big, business was big, and the Yankees won the World Series every year (OK, maybe not everything was perfect). Little recessions here and there quickly righted themselves. In short, we were like those successful economies I mentioned before: Denmark, Germany, etc.
Then in the 1980s, we got greedy. Granted, things weren’t great in 1970s, but they were hardly tragic. Inflation was definitely a problem, and it was whipped by Reagan (more specifically, Fed Chairman Paul Volcker, also the creator of the aforementioned Volcker Rule). But Reagan also destroyed union power. And he cut taxes unnecessarily on the rich, which, as I discussed, made them richer but didn’t help the rest of the economy much at all. He had this rather childish and oversimplified idea that “government is the problem” and that everything would be solved if turned over to the free markets.
Now we’re suffering from that shortsightedness. Reagan’s approach surely brought some short-term gains. But now the chickens have come home to roost, in the form of an economy with a few incredibly rich people and whole lot barely scraping by. That’s what happens when you slash government intervention in the economy. Left alone, capitalism rewards the winners, and then keeps rewarding and rewarding and rewarding them over and over, because they have the capital. Meanwhile, everyone else slowly sees their livelihoods decline. The Gilded Age all over again.
So government is not the problem. But it’s not always the solution either. And let’s not fall into the trap of assuming that capitalism is the problem. We have a mixed economy. We have to constantly struggle to find the right mix. Right now, the balance is too far away from government and toward lassiez-faire capitalism, but we can right the ship.
Solutions?
OK, so the government is not the problem -- for the last time, the problem is a lack of demand. But I’m still not finding much in the way of concrete solutions. You don’t want to tell Americans to start spending money they don’t have, like they used to. You might be able to find more demand in foreign markets, but that will likely be minimal. Everyone else is kinda in the toilet too nowadays.
The solutions are complicated, and I personally don’t have many. Emulating the 1950s might help: more unionization, higher taxes on the wealthy, cheaper education. And of course, we need a strong regulatory framework motivated by protecting the consumer and the economy and not by making wealthy companies and individuals slightly wealthier.
A lot of other things we can do right now are in Obama’s jobs bill – fund public works projects, hire teachers, tax the wealthy a bit more, etc. Oh I know, it sounds like another stimulus bill, and that didn’t work before. Except that it did – not as well as we hoped perhaps, but it certainly helped. I’ve heard a many of estimates of how many jobs it saved or created, and all were between 1.7 million on the low side and 3.6 million on the high side. (You can see a whole bunch of estimates on wikipedia’s page on the Act.)
A lot of other things we can do right now are in Obama’s jobs bill – fund public works projects, hire teachers, tax the wealthy a bit more, etc. Oh I know, it sounds like another stimulus bill, and that didn’t work before. Except that it did – not as well as we hoped perhaps, but it certainly helped. I’ve heard a many of estimates of how many jobs it saved or created, and all were between 1.7 million on the low side and 3.6 million on the high side. (You can see a whole bunch of estimates on wikipedia’s page on the Act.)
Obama’s latest jobs bill won’t solve everything, but it could keep us afloat until we can restructure things in a fundamental way. I may a big believer in the role of the government in the economy, but I don’t think the government can really create much growth all by itself. It can keep the private sector on life support, and can supply it with the vital raw materials of roads, protection, educated workers, etc., but eventually the private sector has to get its act together.
It’s a partnership, really. It may seem like everything is public sector vs. private sector, government vs. capitalism, and unfortunately our national discourse has devolved into that false dichotomy. But that’s really not the case. They rely on each other. They both have a vital role in fixing this economy, and they can’t do it without each other.
So c’mon people. Smile on your brother. Let’s all realize that there are more important things than sticking to your pre-set ideology. Let’s come together and figure out how the government can help us get through this tough time.
