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On Fiscal Austerity
A year ago, I made the decision to switch from studying history to evolutionary biology. I spent the entire summer weighing my options and considering the benefits of both degrees. Part of what I found appealing about biology, and science in general, is its absolute reliance on evidence; arguments from authority are never allowed. Instead, undergraduates sit around a conference table for two hours ripping apart the works of the greatest evolutionary biologists and anthropologists of the past century; we study a contentious subject. This is why we find it impossible to take creationists seriously, or climate change deniers, or anti-vacciners; they have no evidence.
I’ve watched the recent debates over our economic policies for the next few years with great dismay. I hear repeatedly that we should not be passing on more debt to our children (meaning me I suppose). Perhaps that sentiment would seem sincere if the very same people hadn’t already ensured that we won’t get around to paying off current deficit spending until my children’s time, or maybe their children. The majority of the current deficit over the next decade comes from the Bush presidency and the Republican Congress that paid for nothing. This is a fact; the numbers are straightforward enough.
But what dismays me the most is not the insincerity, but the fact that the very people who claim to be looking out for my interests are the ones most actively engaged in undermining them. It is, of course, impossible to take congressional Republicans seriously when they talk of fiscal austerity as their justification for blocking unemployment benefits; their very next move has been to fight for a cut in the estate tax. Not to mention the fact that Republicans always preach about cutting wasteful government spending without actually specifying what programs they will cut. Rather, I’m talking about the “conservative” Democrats who are arguing for fiscal austerity.
The argument goes like this: fiscal austerity is a good thing because we say so. End of argument. No data, no evidence, no historical precedent.
The argument against fiscal austerity can be boiled down to this: Hoover in 1932, Roosevelt in 1937, and the Weimar Republic from 1930 to 1932. Pretty simple, right?
By 1932, the financial crisis was largely over, which is basically the point we reached at the end of last summer. Fiscal austerity gave us the Depression.
In 1937, President Roosevelt felt that there had been enough of an economic recovery to balance the budget; he cut spending and raised taxes, as Ireland has and most of the G20 has pledged to do. Roosevelt’s decision led to higher unemployment and the loss of any progress out of the Depression. Not surprisingly, Ireland currently has 13.7% unemployment and cannot find investors specifically because their policy of fiscal austerity is seen as too risky.
And in Germany, unemployment was 30% by 1932. (The US peaked at 25% at about the same time due to President Hoover’s policies).
E. O. Wilson, Harvard’s great evolutionary biologist, wrote a book about a decade ago entitled “Consilience.” This was the presentation of his argument that all human knowledge, from the natural sciences to the social sciences to the humanities, can be united. Much as chemistry stands on physics and biology stands on chemistry, he argued that the social sciences and humanities stand on biology.
Whether he’s right or not is not the issue at the moment (maybe I’ll write about that in the future). What’s relevant is his criticism of the social sciences. Specifically, economics.
Wilson is a gentle old man; the archetype of the kindly old grandfather. His criticisms of the social sciences were about as close to scathing as he will ever come. The specific criticism was that so much of economics relied on what he termed “folk psychology.” In other words, it relied on “common sense” and not data and evidence. As has become clear, classical economics was one such piece of folk psychology; there’s a reason why behavioral economics has been on the rise since the Recession began. Last fall when I heard the economic historian Niall Ferguson say “Classical economics is dead,” I thought the era of folk psychology was over.
Apparently not.
Current deficit spending will have little impact on long-term deficits and will not harm our recovery. On Wednesday Doug Elmendorf, the director of the CBO, reiterated this point, which has been made most prominently by Paul Krugman (here, here, here and here). In fact, the decrease in stimulus spending will lead to less economic activity, which in turn inevitably leads to lower tax revenues (why do you think our state budget, which was passed this week, included so many major cuts?). There also has yet to be any evidence that we’re risking an inflationary crisis.
The options are pretty straightforward when you stop to consider the evidence: continue stimulus spending in the short term and fight your way out of the recession or follow the Irish down the road to fiscal austerity, high unemployment, no investment, and a worsening Recession. Seems pretty straightforward to me.
So please, consider the evidence before forming an opinion on this. And if not, I would ask that the individuals arguing for austerity stop doing so in the name of their children; you’re not acting on our behalf.
Fact? Fact is the current D administration and D Congress is putting the previous R versions to shame in terms of runaway spending. The magnitude of the present and projected deficit is unprecedented. Are you suggesting that it is not? And, don’t get me wrong, I’m not trying to excuse the previous R iterations in any way for starting this whole mess in the first place–up until now, they were the worst this country had ever seen.
My stomach turns to see D’s and R’s attached to arguments that somehow one side or the other is better or worse than the other. Want the facts? The fact is that both sides collude to create these spending programs, and the recently deceased Senator from West Virginia (a D if you’re keeping score) led them all in pork barrel excess and by example. (He even got Coast Guard budget spent in West Virginia–how rich is that). If you’re going to sling mud against the R’s, I’ll sling it right back, pork for pork. It’s easy. It’s the same way I can best any D-bashing with quick and easy stories of the same kind of fiscal perfidy from the R side.
And, that’s the point. The problem is party politicians. Not D’s. Not R’s. D’s and R’s.
And the only way it can be stopped is to stop the party machines from raping our country by voting the whole lot of them out of office. Except, because of misguided partisans such as yourself, half of the zealots are propping up one side, while the other half are propping up the other, and neither ever really lose. They just swap chairs, and keep on spending.
First off, I’d like to thank you for proving my point about folk psychology arguments. Since your comment is lacking numbers, I thought I’d provide some. But before I do that, I’d like to point out that you’ve changed the topic of conversation without ever dealing with what I wrote about: fiscal austerity. In your rush to call me a “misguided partisan” you seem to have missed the entire raison d’être for this post. And now for those numbers.
I actually was not addressing the magnitude of the current debt in a historical context, but since you brought it up, I’m afraid that you are wrong. While the current debt is nominally much higher than at the end of World War II, it is quite a bit lower when looked at as a percentage of GDP. In 1946, the federal debt was 121.7% of GDP; the estimate for 2015 is the highest in modern times at 102.6% of GDP. (Table 7.1 http://www.whitehouse.gov/omb/budget/Historicals/). Or if we want to talk about yearly deficit, we see the same pattern. In 1943, the deficit peaked at 30.3% of GDP; the modern peak was in 2008 at 2.9% (pages 28-29 of the pdf (not the document itself) http://www.whitehouse.gov/omb/budget/fy2009/pdf/hist.pdf).
The point I was making had to do with where the current debt originated. Here is a CBO report from January 2009 (before Obama took office) that deals with the cost of the wars and Bush tax cuts (pages 30-31 of the PDF): http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf. All of the CBO’s projections were compiled a few days ago in a convenient graph by the Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=3036#_ftn2. Please note that only the lightest blue comes from President Obama (unless we want to count the continuation of the two wars). The dark blue is the economic downturn itself. The rest comes from President Bush. The numbers are pretty clear.
Before I get into the difference between the two parties, I’d like to point out that your Coast Guard example doesn’t hold water. It’s a software development center (http://www.uscg.mil/hq/osc/). Doesn’t sound wasteful to me. (Are all of these naval bases not on major bodies of water wasteful as well? http://www.navy.mil/navydata/bases/navbases.html#millington)
Once again, you’ve changed the conversation. Where in my post did I mention pork spending? I believe the Republican actions I mentioned were the tax cuts, the 2003 prescription drug plan, and the wars in Afghanistan and Iraq. Which of those was pork barrel spending exactly?
I’ve heard the claim that the two parties are equally bad many times, yet I have not once seen adequate evidence of this claim. I’ll limit myself to a few examples of why this isn’t true.
In 1995, Irving Kristol published an essay entitled “American Conservatism, 1965-1995” in The Public Interest. I find one particular passage very illuminating. “Among the core social scientists around The Public Interest there were no economists…This explains my own rather cavalier attitude toward the budget deficit…The task, as I saw it, was to create a new majority…so political effectiveness was the priority, not the accounting deficiencies of government.” In other words, ideology over solving problems, a pattern several conservatives have publicly noted. For example, George H. W. Bush referred to supply-side economics as “voodoo economics” or N. Gregory Mankiw labeled supply-siders as “cranks and charlatans.”
This is a pattern that was on display with the debate over financial reform. When asked by The Boston Globe in April 2010 why he opposed the bill, Senator Scott Brown replied, “Well, what areas do you think should be fixed? I mean, you know, tell me. And then I’ll get a team and go fix it.” In other words, there was nothing wrong with it, but he was opposing it anyway.
The most amazing thing I saw in the debate over financial reform was the sight of Republicans giving floor speeches railing that reform would permanently enshrine government bailouts into law, when the bill existed specifically to ensure that there would be no more government bailouts.
When the Republicans divorce themselves from the truth and take positions base solely on ideology and not evidence, where exactly is the evidence that the two parties are the same?
In fact, it’s pretty obvious that both parties have moved to the right. Take health care for example. So-called “ObamaCare” is to the right of the healthcare plan proposed by President Nixon and is about on par with the plan proposed by Dave Durenberger, or the plan proposed jointly by Bob Dole, Howard Baker, George Mitchell and Tom Daschle, or the plan proposed by Mitt Romney (http://www.tnr.com/blog/jonathan-chait/obamas-moderate-health-care-plan).
No, the Republicans are clearly the problem. Their strategy is simple. President Obama makes a unilateral concession to try to bring them to the table. They refuse. Then they go on TV and accuse the President of being hyper partisan. It’s a bit like a burglar saying that he shouldn’t be punished for his crime because the family forgot to lock the back door.
Before I move on, I’d like to return to the original topic of fiscal austerity. Over a year ago, the two parties presented clear choices. The Republicans catered to their campaign donors, while the Democrats tried to avert a second Great Depression. I’m not sure which is more important: the fact that the Democrats (sort of) did was the experts told them to or the fact that they actually tried something new (as opposed to more tax cuts).
And please don’t bring up the current high unemployment criticism of the stimulus package; that’s an attack from the left, not the right. There was a $2 trillion gap between production capacity and demand; of course $787 billion wasn’t enough. Now the Democrats seem unwilling to get the job done (which is the main criticism of my post), while the Republicans give modern day “welfare queen” speeches. (The Republicans also have yet to explain what the viable alternative to stimulus spending was. I wouldn’t be surprised if this is because the only alternative was another Depression).
Now, you seem to suggest that our 214-year-old two-party system needs to go. What exactly is the alternative? And who will bring it about? The hyper-partisan Tea Party?
I see two alternatives. One is some version of a multi-party system involving coalitions and unclear election results. Do we really want to repeat the presidential elections of 1824 and 1860?
The other alternative is an attempt to be bipartisan. Which is exactly what President Obama tried to do. The Republicans are the ones who refused to cooperate, in spite of concessions.
But I think that the two big problems facing us are the incompetent media establishment and the great influence of money in elections. However, those are topics for another post.
And in response to your proposal that we throw all incumbents out of office, the data is pretty clear that new legislators are more susceptible to special interests. (FiveThirtyEight has dealt with this in the past: http://www.fivethirtyeight.com/2010/03/throw-all-bums-out-bad-idea.html).
While I freely admit that I am a Democrat, I don’t consider anything I said in the original post to be particularly partisan. Partisanship would be arguing against Republican ideas. My complaint is that they don’t have any. I would love it if the Republicans would give up ideology before solutions; I’ve begged my conservative friends at school who are sick of the Sarah Palins running the Republican Party to speak up more. The real threat to our democracy is that we don’t have two rational, functioning political parties.
Now would anyone like to discuss the topic of my post?
“Now would anyone like to discuss the topic of my post?”
Well, not really…I liked it all a lot better when you were posting on Cro-Magnons, Neanderthals, genetic composition of humankind, and other interesting things like that!
We have plenty of political commentators/analyst/provocateurs…of ALL possible stripes. What the world does not need is one more.
Please, stick with your new major, because when I try to wade through this new stuff…my mind begins to glaze over…an eerie feeling of hypnotic numbness begins to set in…then the eyes begin to close…the mouth begins to gape…and…finally… the wake-up call is delivered as I notice the sparkling drop of drool splash on to my desk top.
For God’s sake, Andrew, stop it! Stop it before I drool again!
Unfortunately, this is a conversation that we need to have; science budgets are always cut in a financial crisis. And the only way to avoid that is to avoid future crises. Beyond that, science can guide public policy decisions, but only if scientists are willing to speak up. My hope with the original post was to present a way of thinking about the problem, the way we go about solving scientific questions, and to give the answer that way of thinking leads to.
That being said, there will be more posts about science in the future.
I guess I am confused here. Is this about Keynesian Economics vs the Hayek School, or something else? Looking at the Great Depression, what happened in the UK and France in the 1930s? What role did Smoot-Hawley play? It is all a little murky in my eyes.
While you attack the Republicans for this current mess, and I agree they bear a great deal of responsibility, I don’t believe that the Democrats, who have been in charge for almost three years get a free pass.
The CBO Directors blog says:
“Keeping deficits and debt from growing to unsustainable levels would require raising revenues as a percentage of GDP significantly above past levels, reducing outlays sharply relative to CBO’s projections, or some combination of those approaches. Making such changes while economic activity and employment remain well below their potential levels would probably slow the economic recovery. However, the sooner that long-term changes to spending and revenues are agreed on, and the sooner they are carried out once the economic weakness ends, the smaller will be the damage to the economy from growing federal debt. Earlier action would require more sacrifices by earlier generations to benefit future generations, but it would also permit smaller or more gradual changes and would give people more time to adjust to them.”
A lot has changed since 1933, including the larger salaries of government employees. It sounds to me as though you are saying that we can sustain the recovery by making sure all those government workers, from federal, to state, county and local are paid. Through their spending we will generate jobs in the private sector. Do we know that will be the case? Do we know at what point inflation will kick in? Do we think blogger Gerry Nutter is correct that it takes 5 people in the private sector to sustain 1 in the public sector?
I applaud Senator Scott Brown for looking for offsets for this spending. It is what Congress (The Democratic controlled Congress) voted to do. I would like to know more about the taxes he is trying to avoid in the banking business. But, as someone who is willing to be flexible, his being from the Commonwealth of Massachusetts and all, he has more power at this moment than a lot of people. I am sure he is feeling his way.
Thus, Senator Scott Brown is as close to a Kad Barma free agent as we are likely to see at this time. He should be encouraged, not condemned. And, the work of compromise is not about the President, but about the Senate Majority Leader and the Speaker of the House. To forget that is to risk being tripped up.
As for scientists guiding public policy decisions, that has, in the past, been a mixed affair. I applaud science for giving us the nuclear weapon. Others strongly disagree. I will pass over eugenics as I have to drag that out for a book review I am doing for my own blog. Is DDT a good thing or a bad thing? And where do we stand on Vioxx? A letter in The Globe today suggests it was killed too fast and people suffer for it.
What science knows changes over time.&nbnsp; Well, unless we think that we are now at the end of scientific discovery and we now know all there is to know, from a scientific point of view.
And where is the “Preview” for comments?
Regards — Cliff
I’ve yet to see anyone invoke the Austrian school of thought and I’m not sure it reaches that level of argument. All I’ve heard is this: deficits are bad and we don’t want our children to pay for them. Though if you’ve seen something more complicated than that, please share; I’d like to read it.
I’m not as familiar was the UK and France as the US and USSR. However, I do know that the British government focused first on balancing the budget and got the same results Hoover did. I know even less about France, so the best I can do is the Wikipedia article, which basically says too many Frenchmen had been killed in WWI for there to be high unemployment. The truly interesting case is the Soviet Union, which basically did not experience a Depression, or recession for that matter.
Smoot-Hawley is somewhat controversial. It was a Republican attempt at protectionism that is often seen as setting off a chain reaction of protectionist policies around the world that drove up prices. It’s understandable why it was passed; it was a standard policy in previous recessions. Professor Ferguson argued in the class I took with him that the Smoot-Hawley Tariff in fact had only a minor impact on the severity of the Depression. Of course, as we walked out of class, one of my friends remarked that “the problem with Professor Ferguson is that he thinks he knows more about economics than economists.” So I’ll leave it at it had some negative effect that most economists say was of a significant magnitude because of the global increase in tariffs that followed.
You’re right; the Democrats shouldn’t get a free pass. The initial blog post, as I wrote in it, was directed at conservative Democrats. Though I’d also criticize the leadership for not passing a large enough stimulus package in the first place. The great fear right now is that that package has run out and, without a new one, we’ll experience a double dip recession.
The post from the CBO blog is a nice summation of the situation: we can balance the budget now or deal with unemployment. However, I again refer to what’s happened to Ireland, which began the crisis by balancing the budget; it still has very high unemployment and has been hemorrhaging investors. And as I quoted above, Mr. Elmendorf has said that there is “no contradiction” between stimulus spending now and long-term deficit reduction. The fear is that, if we allow the Recession to grow worse again, the long-term deficit outlook will only get worse because of decreased tax revenue. This would force drastic cuts in spending, which would reduce the amount of money being spent by individuals who receive money from the government (whether as salary, unemployment benefits, SS, etc). This would create a self-reinforcing downward spiral.
That’s not what I was saying at all. (On a side note, I’d like to point out that government salaries are the only ones that have kept pace with inflation and the cost of living; private sector wages have stagnated for 30 years or so). But to address your point, stimulus spending means putting money into the economy to generate business, which both generates tax revenue and creates private sector jobs. I’m certainly not arguing that the government hire everyone, though that’s how we got out of the Great Depression. (You can think of WWII as the greatest public works project in American history). You’re right to ask about inflation; as far as I know, the economists have no idea when it will start to be a problem. However, as of right now, there are absolutely no indications that it is becoming a problem. I’d suggest watching the Fed’s handling of interest rates as a metric for this; Bernanke isn’t exactly some radical Keynesian. Every time the Fed declines to raise interest rates, we know that inflation isn’t becoming a problem. I’m afraid I don’t read Mr. Nutter’s blog (there’s only so much time in the day). Would you mind giving me the link to where he makes that claim? Or better yet, the data he uses to back it up?
I honestly don’t know enough about the $19 billion in taxes in question to deal with whether they were the right decision or not. My criticism of Brown is that he is Not looking for offsets. Rather, he has said that he opposes the tax and that the Senate needs to find offsets and then left it to the Democrats to figure out where to find the money. This is what my problem with the Republican Party is. I can live with policy disagreements and I know the Democrats have not always and will not always be right. But how am I supposed to argue against Brown’s position? He hasn’t said what he would cut. It’s the same as the quote I mentioned in the previous comment from April. And it’s been the standard mentality in both the Reagan and Bush administrations. They campaign on cutting wasteful government spending and then never do it. I wish they would take a concrete position; what do they stand for other than rhetoric?
I do agree that Brown is, relative to his Republic colleagues, a “free agent.” However, the issue I care most about is climate change. And Senator Brown has come out against any attempt to reduce carbon emissions. Prior to that, I would have considered supporting him; having Republicans in the Senate who want to do something about climate change would be a major step forward and this issue is much more important than which party holds the majority. I’m very disappointed in him for that position.
I realize I wasn’t clear about my argument about science. My point was more that the scientific way of thinking, of relying of evidence regardless of whether it agrees with your hypothesis or not, is the best way for government to make decisions. I welcome, even plead with the Republicans, to begin providing evidence instead of rhetoric. I wish they would shove data in my face and shut me up. But it hasn’t happened.
However, I do take issue with your point to some extent. Eugenics was a disgrace as a scientific movement. Darwin condemned it for good reason; common sense told him it was wrong, even though he never lived to see the genetics that would prove the eugenics were at best naïve and at worst pathetic excuses for scientists. Ethics aside, the eugenicists allowed their preconceived notions get in the way of common sense; they didn’t pick up on the fact that behavioral traits are controlled by more than one gene. It takes about 3 minutes of learning population genetics to see why achieving their goals is impossible.
Now, I am not saying that scientists don’t fall into that trap anymore; it happens. But this is not Francis Galton’s time; you can’t publish in a peer review journal without data. And peer review journals are the only source of argument taken seriously (plus a few books, but those deal more with paradigm shifts than answering questions).
DDT is a mixed bag; you get rid of malaria, but you cause mass birth defects. I’m not familiar with the Vioxx controversy, but that story is fairly common. That has more to do with poor regulation and poor standards of testing than anything else; it’s not common for there to be a panic and for a drug that doesn’t actually cause negative side effects to be pulled without serious scientific data to support the decision.
We’re nowhere near knowing everything. It’s been said at many points in history, and it’s always been wrong. And it will continue to be wrong for as far forward as we can project. I’m told by my physics friends that they’ve exhausted most of what there is to know; they’re rather jealous actually. All they get to do know is crash protons together at 7 trillion electron volts. In biology (evolutionary bio, neuroscience, molecular biology, regenerative biology, medicine…basically ever field) there are still an untold number of questions to be answered. It’s a rather exciting prospect.
Have we ever had a “preview” button for comments? I know I don’t have one as an administrator on the current form of the blog. I’ll look into seeing if we can add one.
Here is the view from The Telegraph. I think there is some question as to if deficit spending is the answer. While Ireland is having trouble, so also is Greece and several other Euro nations. The Germans seem to be for austerity.
As for the Soviet Union in the 1930s, they had not only a command economy, but they also killed off 20 or 30 million people (e.g., the Kulaks), making the USSR somewhat analogous to France and its war-dead, reporter Walter Duranty and his Pultizer notwithstanding.
I am giving up and going to bed—I am several books behind and a blog post or two behind myself. Although I have finished Troublesome Young Men.
And, no, there has never been a comments preview on this blog. There is on mine (and Kad’s) and I think it is great, as I have trouble picking up some of my own typos.
Regards — Cliff
And the Germans haven’t provided any evidence as the basis of their decision beyond the implication that austerity is the…morally correct? way of doing things. As for Greece, Portugal, and Italy that has more to do with government incompetency, such as in Greece where it seems no one was paying taxes.
The Telegraph opinion piece is interesting, but doesn’t tell us anything we don’t already know. No one is saying that we don’t have a long-term deficit problem. What is being said is that we don’t have a short-term deficit problem (leading to investor anxiety). There’s simply no evidence of that. The key right now is timing; at some point, we need to begin addressing the deficit. But doing so before the Recession ends is a mistake. I again turn to the example of World War II.
I am perfectly aware of what occurred in the Soviet Union; I’ve read first-hand accounts of both the Revolution and The Terror. (This is why I have absolutely no patience when the word “tyranny” is thrown around to describe the Democrats. Or the label of “socialists,” which in American politics seems to be “Soviet-style-Communists.”) I’ve actually never heard of Duranty, but from the context I can infer what he did. I was in no way arguing for a planned economy; I was merely throwing the USSR out there as an interesting topic of study. While planned economies do very well in crises (eastern Europe recovered faster after WWII than western Europe), having a planned economy is what doomed the Soviet Union financially.
I’ll try to figure out if WordPress has such a feature. I’ve had great success with the spell check (or rather, dictionary) add-ons for Firefox and Chrome; it makes life much simpler. I have no idea if one exists for IE.
“The majority of the current deficit over the next decade comes from the Bush presidency and the Republican Congress that paid for nothing.”
No, Andrew, the majority of the current deficit over the next decade comes from money being spent over the next decade by the current administration and the current (D-controlled) Congress. Dubya isn’t spending it. He left office some time ago. Or didn’t you read the papers?
The graph you cite contains no explanation for the $1.5 extra trillion in spending. Sure, it lists some of the Iraq/Afghan campaigns/wars spending, and the recovery/bailout measures currently being promoted by the current administration and (D-controlled) Congress, but nothing to explain why THESE are the items blamed for the deficit, and not, for example, the portion of the Coast Guard budget being spent within the state of West Virginia, which, I would posit, has more to do with our deficit than most other spending going on, but I digress.
What is actually needed is an examination of what is being spent in the budget overall, not a wholly made-up number represented by taxes not levied to explain why we don’t have a balanced budget. (Kennedy cut the Federal revenue stream by 8.8% back in the 60’s–I didn’t see it noted here, though, by the logic of the graph, it should have been).
Tell me, Andrew… If I don’t make my mortgage this month, is it the fault of my employer for not paying me enough?
Doesn’t this all come down to – there isn’t enough money to go around? If we had more money we could buy (and keep) what we want, and the sellers could do more business and make the profit they desire.
Well, the federal government can print more money (isn’t that effectively what they did with the $789B Stimulus bill?). But, without a corresponding increase in value of some kind, more money merely diminishes the value of each dollar. So what things of value have the Stimulus spending created? I don’t think highway maintenance counts, and that is where a lot of the spending has gone. Propping up State and local governments do not create value either. However, improved education does, and technology advances for alternative energy should. I don’t know what percentage of the Stimulus spending went to create things of value, and what percentage merely helped fill the money void. But it is obvious we need to do more, as the economy is on a slippery slope to second class nation status.
An article in today’s Globe cites the average hours per week of independent study (homework) by college students in the US has fallen from 24 hrs in 1961 to 14 hrs today. That is not a good sign for future “value” creation.
Belfast officials noted that 27.8% of their adult population is “economically inactive” at the recent Innovative Cities Conference. Do we have more than a quarter of our adults not contributing to economic growth? If so, has the paternalism of the Democratic party contributed to that?
The Great Depression was preceded by a maldistribution of wealth, where too much of the money was in too few hands to sustain the economy. Those who had it couldn’t spend it fast enough to support the economy, and those that needed it and would spend it didn’t have enough of it. Does that condition exist today? If so, is it the philosophy of the Republican party to reward the rich with tax breaks and loopholes with the promise of “trickle down” to justify it?
What should the government do to help solve this economic death spiral? Certainly it should never have entered into the war in Iraq on false premises, and wasting $1T+ (plus untold human costs) with virtually no value obtained (maybe even negative value). Although that may be considered a “mistake” in foreign policy, it is a “catastrophe” in terms of our economy. The Stimulus bill was an attempt to bridge the gap to a better economy, but unless we do something to change the basic structure of the economy – it’s a bridge to nowhere.
But the government can’t do everything (and some say it can do nothing). It can change tax policy, however. It should start with the “loophole” used by fund managers that allow them to declare their 20% cut of investment gains (with other people’s money at risk) as a capital gain on their personal income tax. But it must go far beyond that to reward work, instead of penalizing it, and eliminate the many loopholes in tax code enacted to satisfy special interest lobbyists. The tax code should be so simple that it is isolated from the influences of politics – and that is from both parties.
And the people should do something, like valueing education and hard work. That is the more difficult task, but it is what the country was built on in the first place.
Well said, Joe S.
Regards — Cliff
What Cliff said–Well said, Joe S.
10 year projected U.S. fiscal deficit:
$2 trillion — Bush 2001 and 2003 tax cuts
$1 trilliion — Republicans’ 2003 Medicare Part D, which was unfunded
$5 trillion — effects of 2008 global financial crisis incl. lower tax revenue and
automatic stabilizers. GFC happened on Republican watch
$1 trillion — Obama admin. efforts to fight global financial crisis
$9 trillion — Total
Those are the facts. Everything else is just prejudice and hysteria.