July 10, 2009

• Bailout != Stimulus != Deficit

  There is a tendency when trying to prove your point to conflate ideas. Never is this MORE true than in discussion of the economy and government spending. There are a lot of people who are anti-government spending On Principal. Doesn’t matter what spending it is, if it’s the government doing it, it’s BAD.

  But there’s far more people who *pretend* to have that principal only when it is advantageous to do so. When the country is up and arms against the bailout, they jump right on the bandwagon, but when Wars in Iraq and Afghanistan are racking up the bills they are remarkably silent, especially when it’s a Republican President in office that they happen to approve of.

  And so you get the silly arguments against the “Bailouts and Stimulus” always thrown together as if they were the same thing. Often the commentators explicitly CALL the Stimulus a Bailout, without identifying which if any companies the Stimulus is bailing out.

  Economists see things differently. There are several liberal economists who have some substantial credentials behind their name who predicted the housing bubble, financial crises, and the economic fallout that would result and were wholly ignored by the media and the powers in charge of setting our financial agenda. Economics like Paul Krugman and Dean Baker and Joseph Stiglitz. No small names. They say almost to a man that the Bailouts were poorly handled but that the Stimulus is not too much government spending, it’s TOO LITTLE.

  Keynesian economics. Basically as the economy goes into a tailspin and people start laying people off and selling stuff like crazy, there’s unused capacity in the market. To break the downward spiral you need someone to spend money to buy up some of that capacity and put it to use, get money back into the hands of people so they can buy things, build things, invest in things. And if private investors are unwilling or too broke to do so, the spender of last resort ends up being the government. No amount of market fundamentalism will change that. Somebody has to spend to get the economy rolling again. In some way shape or form that’ll be the government. Be that by giving tax cuts, infrastructure projects, grants for entrepreneurs, or jsut hiring people to dig holes and fill them back in, the government in some way will have to pay. If they don’t, the economy just sinks further and further into depression and STAYS there. Stagnating.

  It was like that before Obama passed the second stimulus which was supposed to be bigger and larger and better targeted than the first Bush stiumulus. And what he proposed certainly was that. Still, many of these same prescient economists raised objections. Not that the Stimulus was wrong, but that it was waaaay too small. They said, if this is the stimulus we pass, then we’ll need another one sooner rather than later or the economy will get much worse.

  So you’d think that then the President’s proposal when it went through Congress would warp and evolve into a bigger more effective bill.

  No.

  It got *smaller*. Under the weight of Republican criticism and because of the President’s almost excessive desire to compromise the bill shrunk substantially thanks to representatives and senators who were terrified of losing elections for being labeled “pork barrell” spenders. Absurd really.

  So now the economic signs suggest as predicted that the Stimulus HAS helped slow the tide of the fall but nowhere near having reversed it. And things have, predictably, gotten much worse. So you’d think, logical people would say “Time for another Stimulus!” But no. Now we hear the chorus of “No More Government Spending! No More Bailouts! No more rising Deficits!”

  Nevermind that a stimulus unlike bailouts has a real effect on middle and low income America. Nevermind that a stimulus can be targeted to give direct jobs to real people who need it, or extend unemployment benefits so that regular people can survive while looking for a job. Nevermind that a stimulus doesn’t hide the problem of toxic debts, like bailouts do, but is entirely separate and benefits individuals in all industries.

  But the bailouts have all the negative sway. So anyone wanting to stop the Stimulus or more importantly to them I think, make the Democrats looks bad (not a hard thing these days), just hitches the Stimulus idea right on top of the specter of the ideas of bailouts and huge government spending resulting in dangerous Deficits and of course the nightmare of Hyperinflation.  So then any idea of further stimulus, however helpful it might be ends up crushed.

  And that’s not the ONLY piece of legislation being crushed by this fearmonger tactic. Healthcare Reform is also being attacked along the same lines. As is environmental legislation. People look at these huge and wholly necessary government programs and see them ON TOP of bailouts and stimuluses and hugely expensive wars in Iraq and Afghanistan and they think, man this is just too much. Surely huge deficits will result if we keep spending like crazy!

  Of course this isn’t an irrational fear. Deficits COULD rise due to these programs to dangerous levels. Especially if they don’t WORK.  But that isn’t a fait accompli. If these are programs we SHOULD implement, that are better for our nation in the long run, then we should do so in an attempt to turn our economy around. If we end up having too little money we could always cut back on them later, or better yet, cut back on other things we ought not be spending our money on! Running away with our tail between our legs is NOT a solution to our economic woes. The market is not Magic. Things won’t just amazingly get better for the majority of the people on its own.

  The deep problem here is that we’ve already spent the bad money and now that the good programs are being proposed we’re afraid we don’t have enough. Fair enough. Maybe we shouldn’t have spent all that bad money then?

  I once heard a woman call into a radio program who made the point very succinctly.  She said: “Why is it that we hear day after day about billions spent on wars in Iraq and Afghanistan and billions or even trillions spent to Bailout Wallstreet but then when it comes to Health Care Reform all of sudden there isn’t enough money to pay for it?”

  The response to this brilliant and honest question was horrible. The commentator said something along the lines of this: “if the deficit grows it will be our children and our children’s children that pay the price. Government spending is bad blah blah blah.” 

  Don’t get me wrong, he’s right.  Too big of a deficit IS dangerous and we do need to control it or future generations will suffer. But that has nothing to do with the woman’s point.

  And her point is well taken. Why is it that the priorities of our government are exactly backwards to that of the people? Whenever progress is made in promoting agendas that people actually want like health care reform, energy independence, social programs, mortgage fore closure relief and education reform, a huge hue and cry goes up about how we’re just squandering money, spending wealth recklessly, bankrupting the country.  But whenever money is spent providing resources to keep the rich companies like banks and automobile manufacturers in business or to promote wars and maintain military bases and prisons that we didn’t even ask for, you never hear a whisper. Those monies are spent long before the people even have a chance to object to them.

  Currently our total defense spending is upward to a trillion dollars a year.  Over $600 billion dollars have already spent on Iraq alone. A war we were misled into going into! Spending on the war in Afghanistan is continuing. The Treasury has guaranteed over $1.5 trillion of bank assets. And the $700 billion Tarp fund went directly as loans big banking institutions. All that we’ve *already* spent or locked in our commitment to spend. 

  So it’s like only after the rich people and the military people’s interests are taken care of do our politicians ever even consider ours. Is that any surprise though? Why should a politician care about reforming health care when doing so will upset his corporate donors. After all, HE already has pretty damn good insurance. And even if he didn’t most of them are rich enough that they don’t need it. And the same is true of most of their friends and acquaintances.

  I’m not saying this is deliberate evil. I’m saying their priorities are based on their experiences and their interests in the political game. The desperation of your average family collapsing under the weight of medical bills and student loans and credit card debt and an upside down mortgage is something they only hear about second hand. It’s not staring them in the face. It isn’t real to them.  So of course bailouts take precedent over health care. Large military budgets take precedent over healthcare. Nonsense debate over whether to have resolutions honoring Michael Jackson takes precedent over healthcare.  Of course it does. It’s not their fault, but it’s because they think that way that they get the money that allows them a chance of winning office.

  If we were living in a democracy, we wouldn’t be bickering over saving a few bucks here or there in energy reform and health care reform. Rather, those two things would have been long since done before we even considered the amount of money we might be willing to spend to keep bankers earning their bonuses let alone on unauthorized wars of aggression abroad. We’d be spending money to enhance our manufacturing sector, and develop new businesses and improve our infrastructure long before we spent money to maintain unnecessary bases abroad or wage war in false pretenses in a country most Americans care little about.

  But because all our government priorities are all crazily mixed up and have been for generations, politicians, pundits, and lobbyists can get away with this crazy tendency to have to conflate all government expenditures together and paint them all with the same dangerous brush of the eeeevil deficit.

  If we’re to get beyond that though we have to start thinking now about each program on its own merits and figure out what we want for ourselves as a nation and how to get it done.

  • 5:48 pm
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