Third Party & Independents Archives

Absent - A 'Grand Plan'

As a measure of how government is performing we can look to the current deficit debate swirling in the Congress. Most economists are predicting a calamity of sorts if the debt ceiling isn’t raised. But, it’s worth noting that the majority of economists were surprised by the paltry jobs number for June, some 18,000.

A quick review of some current stats clearly tells us a recovery from the great recession is not going well. Unemployment stands at 9.2%, some 47% of tax filers pay no income tax, and we are mired in debt currently standing at $14.2 trillion. Millions of homes are in foreclosure, 1.2M additional unitsso far this year, and a housing recovery has been pushed out to 2016.

Congress is engaged in this debate over raising the debt ceiling based on two factors: expenditures and taxes. Yet, the debate doesn't address the problems that have been building in this country since the 1970’s. We got to where we are through the push to globalise world economies and, with computer technology came the ability to invent new financial investment schemes such as derivatives and hedge funds. Neither was, or is, well regulated. Anti-trust laws were shelved in favor of ‘greed is good’. Corporate profits earned overseas aren’t covered by US tax law making it convenient for companies to keep their foreign profits offshore. Derivatives and hedgefunds still remain largely unregulated.

New York Times columnist, Thomas Friedman, gave a speech at the annual meeting of the National Governors Association. He made some very good points relative to the US position in the globalised society. He relates that we have two education challenges: more and better. He spoke of a small US college were all the foreign applicants had SAT’s of 800 or better. He said that while every job position is effected by a well educated international work force, the middle class has been hit the hardest. He believes that we can’t begin to compete in the global economy until we address the education problem, beginning with k-12. He says that the current college curriculum is training workers for antiquated, $12/hr jobs. He believes we must bring a collective solution to the table for education suggesting that learning institutions, business and government come together to develop an educational plan for the future. He believes that each individual has to strive to be innovative, creative and invoke an entrepreneurial spirit. He recommends that each individual think like an immigrant, “nothing will be given to you”, think like an artist “service with a personal touch”, and think like a waiter, giving an extra helping of food to their customer, for example. He suggests each should strive to do something a machine, robot or immigrant can’t do.

He relates that, as a nation among nations, we have gone from being ‘connected’ to being ‘interconnected’ to being ‘interdependent’. He relates that Greece squandered EU resources and the opportunity to develop to the level of a Germany. He feels we have moved away from a nation with sustainable values to a nation with situational values, chasing CDO’s and hedgefunds for example. He described the housing bubble as finance on steroids.

I agree, these are all desirable traits in a labor force for the future, excluding his quest for immigration. I agree, that for much of our history immigration served the country well. But, we are no longer a developing country. It makes no sense to me to push for strong immigration while there are some 25M US workers un/underemployed and with job numbers in decline for the past decade. Congress wants to cut taxes and cut spending but show no desire to cut/slow/control immigration.

We don’t see any ‘grand plan’ in our future stemming from the deficit debates. There seems to be no rationalization or planning going on. Just a slugfest over taxes and revenue. At this point in our economic decline and some 25 years into globalisation should these debates not be based on some plan to improve education, address immigration, trade deficits and the like? Should there not be some plan to implement a flat income tax and/or a VAT for trade? Should we just ‘accept our fate’ and let the nations to whom we are indebted set the agenda for the US?

Even in cutting the deficit it seems we may only get ‘half a loaf’. A plausible projection on paying down the deficit at a 5% interest rate the monthly interest would be around $35B. Thus, cutting the deficit over 5 or 10 years by $2=2.5 trillion assures the debt will largely be paid off by our children, grand and great-grand children. Shame on us if that’s the outcome.

But, paying so little toward lowering the deficit does provide a great tool for the Corpocracy to maintain a headlock on the consumer/worker, giving tight control over the US economy/wages over the next century.

Jeff Greenfield wrote a futuristic article for the Washington Post suggesting that if the debt ceiling isn’t raised a 3rd party president may be sworn in Jan 20, 2013. That is futuristic, but it’s not out of the realm of possibility for 2016. We should all work to make sure that any 3rd party that does come to fruition is established in some ironclad rules to prevent such a party from ever being co-opted by special interest. To do otherwise would just lead to a repeat of the duopoly/corpocracy, IMO.

Otherwise, we have the Corpocracy we deserve.

Posted by Roy Ellis at July 18, 2011 10:40 AM
Comments
Comment #325991


The interdependence is the key to understand why political and economic reforms are such an up hill battle.

From a materialistic point of view, the American people enjoy a very good lifestyle. The materialistic lifestyle that we crave comes from the corporations. A conflict of interest that has grown tremendously in the last few decades due to the increased numbers and increased demands of investors. We are reluctant to rock the boat.

Our other big problem. Our gravy train is being capsized by the increasing numbers of people trying to get on board. There are six billion people in the developing countries that are demanding their fair share of the resources, The bulk of which has, in the past, gone into creating the lifestyle of the Western world. The third world is rocking the boat.

Posted by: jlw at July 18, 2011 1:03 PM
Comment #325995

Roy writes; “Most economists are predicting a calamity of sorts if the debt ceiling isn’t raised.”

The New York Times article below says…

“Industrialized nations have almost always adopted a combination of the two to cut debt, according to an International Monetary Fund survey last year. The fund, which examined 30 instances dating to the 1980s, found that nations on average closed half the gap with tax increases and half with spending cuts.

Both approaches cause immediate economic pain, but the dominant school of economic theory predicts that tax increases should be somewhat less painful to the nation’s economy. A $100 spending cut reduces economic activity by $100, while an equivalent tax hike will be paid partly from savings, so that spending is reduced by a smaller amount.

Recent studies, however, have found the opposite: Countries that rely primarily on spending cuts tend to experience less economic pain in the short term. Moreover, in some cases, the cuts seem to spur faster growth.

The monetary fund study reported that a 1 percent fiscal consolidation achieved primarily through tax increases reduced economic activity by 1.3 percent over two years, while an identical consolidation driven primarily by spending cuts reduced activity by 0.3 percent.

“It’s coming to be accepted wisdom that it’s better to have spending cuts than tax increases,” said Alan Auerbach, an economics professor at the University of California, Berkeley.”

http://www.nytimes.com/2011/07/18/us/18econ.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=tha23

Posted by: Royal Flush at July 18, 2011 1:59 PM
Comment #325998

Royal, I’ll apply a conservative argument.

Since a majority of voters say that both spending cuts and tax increases are needed, the cut taxes economists are obviously wrong.

Posted by: jlw at July 18, 2011 2:37 PM
Comment #326032

Royal Flush,

That’s a very disingenuous argument. The article you cited is titled, “Politicians Can’t Agree on Debt? Well, Neither Can Economists”. It made a case for BOTH methods yet you only mention half of it.

Very misleading of you.

Posted by: Aldous at July 18, 2011 7:54 PM
Comment #326036

Aldous, why don’t you post the “other side”?

Posted by: Royal Flush at July 18, 2011 8:12 PM
Comment #326038

“Aldous, why don’t you post the “other side”?”

Royal Flush,

Very Testy. Did you think that the article would not be read? It basically said that there is no agreement among economists on the issue.

Posted by: Rich at July 18, 2011 8:24 PM
Comment #326041


One opinion I heard on the E.U. is that they either consolidate their debt, as our Founding Fathers did after the Revolution, or the E.U. will break up. The wealthier nations want to exploit the cheaper labor in the poorer countries. The poor countries want a standard of living comparable to the wealthier nations.

Posted by: jlw at July 18, 2011 8:34 PM
Comment #326042

I might add that the article was about the comparative degree to which tax increases or spending cuts to reduce the deficit would negatively effect the economy. It is given that both will have a negative impact.

It seems to me that we might listen to the general advice of the conservative Chairman of the Federal Reserve who has repeatedly advocated maintenance of fiscal expenditures in order not to derail an economy struggling to recover while addressing our long term deficit problems. All too often, conservatives conflate the two issues. Lets keep our eye on the ball. It is recovery and jobs first. It is addressing problems in the economy that create a long term deficit problem, i.e., health care inflation. If we don’t develop a sustainable economy and deal with the true drivers of the future deficit, the long term problems can never be solved.

Posted by: Rich at July 18, 2011 8:36 PM
Comment #326055


Perhaps we should listen to the general advice of the conservative Chairman of the Federal Reserve, but the last time we did that, it did not work out so well. This one was part of last ones regime and perhaps we should have look elsewhere when choosing the new one.

Posted by: jlw at July 18, 2011 9:43 PM
Comment #326059

jlw,

I don’t disagree with your point about Greenspan. The jury is still out on Bernanke. He has taken a lot of criticism, some of it justified. He acted decisively to save the banks. But monetary policy of the Fed hasn’t been as effective for main street. However, on priorities, I think he is correct. The economy is fragile. Don’t prematurely withdraw fiscal support for the economy until it is capable of sustaining itself. Plan for the future, but act now to save the economy.

Posted by: Rich at July 18, 2011 10:10 PM
Comment #326082


Rich, I have been defending the liberal status quo to much lately, so much so that I feel one of my radical left wing seizures coming on.

Roy, I bet you can’t guess in a million years what Glen Beck was doing in 1985.

YouTube video - Bruce Cockburn “call it democracy” (w/subtitles) for good shots of Glen, or perhaps it is Glen’s evil twin.

For the full visual bi-partisan effect - Bruce Cockburn-call it democracy (live)

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