In 2009 the National Federation of Independent Businesses surveyed its membership to find out why they weren’t expanding. While all the usual suspects were mentioned; taxes, regulations, labor costs, the most common answer was lack of sales. Last month, Mike Konczal, a Fellow at the Roosevelt Institute, reviewed the economic literature and concluded that the cause of the continued near-stagnant economy was a lack of demand. Mr. Konzal prepared a white paper with the title, “How Mortgage Debt is Holding Back the Recovery.” He concluded that too many people were still paying off past debts, particularly mortgage debt, to buy new products and revive the economy.
Although the Obama administration has made several attempts to induce banks to renegotiate mortgages and bring them into line with current home values, banks have been less than helpful, because that would mean lowering the value of the assets on their balance sheets. That left millions of people still paying off debt incurred during the housing bubble, unable to get their debt reduced to reflect current rates or current home prices.
The answer to lack of demand is fairly straightforward. The government should honor its mandate to promote the general welfare by stepping in and creating demand. There seems to be surprising bipartisan support for this approach, up to a point. Republicans are resisting cuts to the defense budget because it would mean fewer jobs. There’s some truth to that, although in many cases the defense industry jobs are simply make-work at a time when there is real work to be done. Elizabeth Warren said it brilliantly: “We’ve got bridges and roads in need of repair and thousands of people in need of work. Why aren’t we rebuilding America?”
Beyond our crumbling roads and bridges, add the drought that’s affecting key agricultural regions, that appears to be the result of global warming — Al Gore’s inconvenient truth. This is a time to look for a solution to the drought conditions and reduce our dependence on fossil fuels. At a time when Federal Reserve Notes are paying less than the projected rate of inflation, this is the time for the US to undertake a massive program of rebuilding and developing energy resources that don’t generate greenhouse gases but use wind, solar and tidal power. With our vast coastlines we can harness tidal power to build pipelines to bring water to the drought stricken areas instead of carrying tar sands across fragile agricultural areas.
In March 2012, Brad deLong and Lawrence Summers wrote “... as a matter of arithmetic, in a depressed economy like the present, if a long deep recession casts even a small shadow on future potential output, with interest rates in the range at which the US has been able to borrow, there is a substantial likelihood that expansionary fiscal policy right now would be self-financing, and an overwhelming likelihood that it would pass a benefit-cost test.” In other words, it may be possible to create jobs, develop the technology that could save the planet, and to it all at little or no long term expense.
Faced with this — the well documented economic analysis and the relatively reasonable energy scenario — the Republican Party is offering a bleak future, where energy independence calls for more fossil fuels and greenhouse gases, and claims that we can only have jobs if we do away with food safety and shred the social safety net. When Paul Ryan spoke of the future, he spoke of an energy policy controlled by oil companies and a health care system controlled by insurers. and an economic policy based on fear and lack of understanding of long range effects. What they offer is less an economic and energy policy than a worst case scenario. Even Newt Gingrich’s colony on the moon offered a sort of promise for the future — the slogan of Romney/Ryan should be “abandon hope all ye who enter here”.
Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email firstname.lastname@example.org.
From The Progressive Populist, September 15, 2012
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