If you scream about the deficit, but then don't do anything about it, or pass tax cuts that increase it, you actually endanger the nation more than the deficit, itself. The Republicans are forcing this to happen. They are shortening the time before the world's nations will jettison the US Dollar as the world's reserve currency, because US fiscal policy will lose credibility even faster, while the nation will be mired in non-recovery. However, the dollar is likely to lose its special status, anyway, sooner more likely than later.
What matters is not the government deficit, but the trade deficit: the two are not necessarily related. Deficit spending that enhances US jobs, productivity and creativity would actually cut the trade deficit and delay a move away from the dollar. Deficit spending that simply increases our national debt, like the tax cut for the wealthy, will bring us closer to the time when the US Dollar becomes just another currency; it increases our trade deficit and makes the US poorer.
The dollar losing international reserve status will be a very big deal. It will be a disaster for the US, unless the way has been carefully prepared. What's the likelihood of that?
This is what will happen: the US can no longer so freely borrow on international markets: the Fed can't blithely create money as it is doing now with Quantitative Easing. The bigger problem would be: how do we repay (by far) the largest trade deficit in the world? We won't be able to just print dollars for payment. We'll have to earn Renminbi, or Marks or Rials to buy from those places.
Imports will cost much more. Three-dollar gas will be a faint memory: prices would be comparable to Europe's ($5-7 per gallon now), or much higher.
We also won't be able to continue our military mission to control every corner of the globe. That, to me, would be a positive outcome, both for the US and the world. Who would lend to us at the low interest our bonds now pay? Interest costs to maintain our military could bankrupt us, something that happened not only to the Romans, but also led to the overthrow of the Bourbons, ushering in the French Revolution.
Any dollar-denominated asset would be worth much less outside the US. Americans would have to produce more, at lower cost--through subsistence wages, perhaps, or greater efficiency, or probably both--and import less.
Perhaps, an increasingly impoverished majority would demand Equality, as rebelling masses did on the streets of Paris, but it might come too late. The billionaires may have decamped, with their tons of gold (not dollars), just like Tunisia's Ben Ali!
Loss of reserve status could end the American empire. While temporarily poorer, Americans could end up freer and better off--if they throw out the corporate octopus impoverishing us all.
Showing posts with label Deficit. Show all posts
Showing posts with label Deficit. Show all posts
Saturday, January 22, 2011
Thursday, December 2, 2010
Obama: Ordinary Politician
The American people have been betrayed. An election stolen; a popular election and a surge of hope: hope disappointed; another election bought.
Obama perpetuates the failing policies of the past: he depends on "experts" from the past. While he could give inspirational speeches as a candidate, he's a pedagogue as President, rarely a fighter. He went from talking about changing the dialogue, to repeating it.
Obama is now going to cut (government) workers wages to trim the deficit, while unemployment is high and borrowing is dirt-cheap. Wage-cuts will slow down the economy further, increasing the deficit. He's talking about "compromising" with Republicans, by caving in on continuing tax cuts to the over $250,000 crowd. That would add $700 billion to the deficit, but few jobs.
He signed a health care bill, but like Medicare Part D, signed by W, it caters to the needs of the health care industry far more than patients, and provides no alternative to private health insurance; he could have pushed for the public option but Rahm Emmanuel persuaded him otherwise. "Reform" will give insurers huge new markets, subsidized by Uncle Sam.
He did sign a New Start treaty that cuts nuclear weapons, but his timid, transactional politics, reinforced by the Senate Democratic leadership, makes it unlikely to be ratified in this Congress; it won't be in the next.
Has he gotten us out of wars? Obama campaigned against Iraq, but we're still in it: our military is angling to stay after the 2011 treaty cut-off negotiated by Bush! And we're in up to our ears in Afghanistan--now until 2014. And Pakistan, and--the torturers are unpunished, and Guantanamo still has inmates.
Obama campaigned on the need for an international agreement on climate change, deploring Bush's rejection of Kyoto. He went to Copenhagen empty-handed from Congress (no climate change legislation passed), but he didn't use the EPA's so-far unchallenged mandate to regulate CO2 as leverage. So, no agreement was reached, just a handshake on the "we'll try to reduce emissions," mantra.
Then there's the deficit commission. Obama appointed advocates for dismantling Social Security and Medicare. So, of course, the co-chairs propose cutting Social Security, not raising the cap to better finance it, and cutting Medicare, not restructuring health care so we can pay for it.
Obama hasn't even challenged the false notion that Social Security contributes to the deficit; it doesn't. Instead, he tries to co-opt Republican anxiety about deficit spending, while millions are without jobs, or homes, and the economy is stuck. The nation needs a huge public works/public jobs program, not deficit-cutting: not until unemployment is slashed.
Obama is hardly a reformer like Emperor Majorian. Despite his rhetoric, he is a lesser Emperor, like Glycerius, creature of Generals and Senators, two years before the fall of Rome.
Obama perpetuates the failing policies of the past: he depends on "experts" from the past. While he could give inspirational speeches as a candidate, he's a pedagogue as President, rarely a fighter. He went from talking about changing the dialogue, to repeating it.
Obama is now going to cut (government) workers wages to trim the deficit, while unemployment is high and borrowing is dirt-cheap. Wage-cuts will slow down the economy further, increasing the deficit. He's talking about "compromising" with Republicans, by caving in on continuing tax cuts to the over $250,000 crowd. That would add $700 billion to the deficit, but few jobs.
He signed a health care bill, but like Medicare Part D, signed by W, it caters to the needs of the health care industry far more than patients, and provides no alternative to private health insurance; he could have pushed for the public option but Rahm Emmanuel persuaded him otherwise. "Reform" will give insurers huge new markets, subsidized by Uncle Sam.
He did sign a New Start treaty that cuts nuclear weapons, but his timid, transactional politics, reinforced by the Senate Democratic leadership, makes it unlikely to be ratified in this Congress; it won't be in the next.
Has he gotten us out of wars? Obama campaigned against Iraq, but we're still in it: our military is angling to stay after the 2011 treaty cut-off negotiated by Bush! And we're in up to our ears in Afghanistan--now until 2014. And Pakistan, and--the torturers are unpunished, and Guantanamo still has inmates.
Obama campaigned on the need for an international agreement on climate change, deploring Bush's rejection of Kyoto. He went to Copenhagen empty-handed from Congress (no climate change legislation passed), but he didn't use the EPA's so-far unchallenged mandate to regulate CO2 as leverage. So, no agreement was reached, just a handshake on the "we'll try to reduce emissions," mantra.
Then there's the deficit commission. Obama appointed advocates for dismantling Social Security and Medicare. So, of course, the co-chairs propose cutting Social Security, not raising the cap to better finance it, and cutting Medicare, not restructuring health care so we can pay for it.
Obama hasn't even challenged the false notion that Social Security contributes to the deficit; it doesn't. Instead, he tries to co-opt Republican anxiety about deficit spending, while millions are without jobs, or homes, and the economy is stuck. The nation needs a huge public works/public jobs program, not deficit-cutting: not until unemployment is slashed.
Obama is hardly a reformer like Emperor Majorian. Despite his rhetoric, he is a lesser Emperor, like Glycerius, creature of Generals and Senators, two years before the fall of Rome.
Friday, August 20, 2010
People Don't Matter
That appears to be the predominant political economy of our day. Our unemployment rate remains high, and in fact may be much higher than the 9.5% cited by our government, but still, the movers and shakers (M's&S's) are debating how to cut the deficit.
First of all, now is not the time to cut deficits through austerity, because deficits can actually rise if unemployment, bankruptcies and foreclosures continue to rise. Austerity could contribute to higher unemployment, etc. and therefore not only lower tax revenues but also raise costs (more people looking for help).
The only way to cut government expenditures without a negative impact on jobs, housing and small business, would be to bring troops home from foreign parts, closing down foreign operations, like the wars in Iraq and Afghanistan, and some of the bases in 140 plus countries.
The M's&S's don't consider cutting our imperial adventures, however. What they are doing is: being niggardly about unemployment extensions, food stamps (Congress just cut next year's appropriation, despite a surge in applicants), and even tax credits for small business. What they are talking about are cuts to Social Security and Medicare, while Republicans are nearly unanimous about extending the Bush tax cuts, including those that have made the wealthy so much wealthier.
The argument they make about the latter: lower taxes will stimulate investment, is belied by lagging investment now, with those same low tax rates. Elites are sitting on their money, or paying $100+ million for Picassos, not investing in jobs. Investors will also invest in Brazil, or Russia, places where they'll get more of a return, until growth is restored here. Here, they'll park it in Treasuries, or gold.
Our unemployment rate may be twice as high as the 9.5% rate, when those without jobs for more than a year are included. Yet, all the (supposedly) liberal administration and Democratic Congress can do is add a little money here and there to keep things from getting dramatically worse. The Republicans' push for deficit cutting would make things worse, not better, but since Americans are unhappy with Democrats' half-measures, it looks increasingly likely that we'll go that route.
People don't matter, but corporate profits do. Big banks are now doing very well, and big corporations have found ways to squeeze profits out of job-cutting and foreign operations, so, they will resist taxes on the wealthy and government stimulus programs, and spend 100's of millions on campaigns to promote their positions.
The only hope would be if people see through the corporate agenda. Instead, millions worry about a Muslim community center two blocks from "Ground Zero!"
The global takeover by the extremely wealthy is proceeding. They are much like the Senators of Fifth Century Rome. Only an aroused populace can stop this.
First of all, now is not the time to cut deficits through austerity, because deficits can actually rise if unemployment, bankruptcies and foreclosures continue to rise. Austerity could contribute to higher unemployment, etc. and therefore not only lower tax revenues but also raise costs (more people looking for help).
The only way to cut government expenditures without a negative impact on jobs, housing and small business, would be to bring troops home from foreign parts, closing down foreign operations, like the wars in Iraq and Afghanistan, and some of the bases in 140 plus countries.
The M's&S's don't consider cutting our imperial adventures, however. What they are doing is: being niggardly about unemployment extensions, food stamps (Congress just cut next year's appropriation, despite a surge in applicants), and even tax credits for small business. What they are talking about are cuts to Social Security and Medicare, while Republicans are nearly unanimous about extending the Bush tax cuts, including those that have made the wealthy so much wealthier.
The argument they make about the latter: lower taxes will stimulate investment, is belied by lagging investment now, with those same low tax rates. Elites are sitting on their money, or paying $100+ million for Picassos, not investing in jobs. Investors will also invest in Brazil, or Russia, places where they'll get more of a return, until growth is restored here. Here, they'll park it in Treasuries, or gold.
Our unemployment rate may be twice as high as the 9.5% rate, when those without jobs for more than a year are included. Yet, all the (supposedly) liberal administration and Democratic Congress can do is add a little money here and there to keep things from getting dramatically worse. The Republicans' push for deficit cutting would make things worse, not better, but since Americans are unhappy with Democrats' half-measures, it looks increasingly likely that we'll go that route.
People don't matter, but corporate profits do. Big banks are now doing very well, and big corporations have found ways to squeeze profits out of job-cutting and foreign operations, so, they will resist taxes on the wealthy and government stimulus programs, and spend 100's of millions on campaigns to promote their positions.
The only hope would be if people see through the corporate agenda. Instead, millions worry about a Muslim community center two blocks from "Ground Zero!"
The global takeover by the extremely wealthy is proceeding. They are much like the Senators of Fifth Century Rome. Only an aroused populace can stop this.
Tuesday, August 10, 2010
The Budget War and the War War
Paul Krugman decries the deficit hysteria, but even he doesn't make much of the connection between our turning off the streetlights (literally) and the Wars, and/or "Defense."
How much do we spend on Defense every week? Between $26-27 billion. What do we get for it? Two horrendous wars that are going nowhere, and over eight hundred bases abroad in nearly 140 countries. Probably half that money is going out of the country, and most of the rest supports industries that are working on what are effectively cost-plus contracts to produce things that will kill, or enable people to kill, many people.
Employment in civilian sectors costs half as much per worker as defense industries. If the same money were spent on infrastructure, or on human services like teaching, twice as many could be employed. So, a good part of the unemployment problem could be solved if defense spending were radically cut and the savings spent on domestic needs. Further, more of the money would stay in the US.
When we have to turn off streetlights, cut back on police, gut local school staffs, we are, as Krugman points out, screeching in reverse. Our nation will be the poorer for all these austerities.
Growing debt could conceivably become a problem at some point, although right now, US government bonds still sell easily at extremely low interest rates. So, as Krugman--and I in my earlier blog--have pointed out, now is not the time to be worrying about high deficits; we need to really stimulate the economy, not just stabilize it and say the job is done.
But, the huge amount of money going to defense could finance real domestic needs. If the world needs a policeman, let the world community step up; why should the US alone? Further, our world policeman role has had few positive effects in the last 50 years. We caused the Middle East and East Asian conflagrations by our interventions to install the Shah in Iran, to create Islamist opponents to leftist Afghans, and to buttress a corrupt regime in Vietnam.
Everyone (except a few large corporations) would have been a lot better off if we had kept our hands to ourselves. We meddle virtually everywhere, and create enemies even in Europe because of it.
So, the best way to stimulate the economy and answer the howls of the deficit hawks at the same time is to withdraw, not just from Iraq and Afghanistan, but from most of those 850 odd bases all over the world, and to stop equipping our military with high-priced toys that make them think they can overawe the world.
Looking at history, however, the above seems unlikely. It certainly didn't happen in Rome--until it was forced on her by defeats. That will happen to us, unless we withdraw on our own terms. Now.
How much do we spend on Defense every week? Between $26-27 billion. What do we get for it? Two horrendous wars that are going nowhere, and over eight hundred bases abroad in nearly 140 countries. Probably half that money is going out of the country, and most of the rest supports industries that are working on what are effectively cost-plus contracts to produce things that will kill, or enable people to kill, many people.
Employment in civilian sectors costs half as much per worker as defense industries. If the same money were spent on infrastructure, or on human services like teaching, twice as many could be employed. So, a good part of the unemployment problem could be solved if defense spending were radically cut and the savings spent on domestic needs. Further, more of the money would stay in the US.
When we have to turn off streetlights, cut back on police, gut local school staffs, we are, as Krugman points out, screeching in reverse. Our nation will be the poorer for all these austerities.
Growing debt could conceivably become a problem at some point, although right now, US government bonds still sell easily at extremely low interest rates. So, as Krugman--and I in my earlier blog--have pointed out, now is not the time to be worrying about high deficits; we need to really stimulate the economy, not just stabilize it and say the job is done.
But, the huge amount of money going to defense could finance real domestic needs. If the world needs a policeman, let the world community step up; why should the US alone? Further, our world policeman role has had few positive effects in the last 50 years. We caused the Middle East and East Asian conflagrations by our interventions to install the Shah in Iran, to create Islamist opponents to leftist Afghans, and to buttress a corrupt regime in Vietnam.
Everyone (except a few large corporations) would have been a lot better off if we had kept our hands to ourselves. We meddle virtually everywhere, and create enemies even in Europe because of it.
So, the best way to stimulate the economy and answer the howls of the deficit hawks at the same time is to withdraw, not just from Iraq and Afghanistan, but from most of those 850 odd bases all over the world, and to stop equipping our military with high-priced toys that make them think they can overawe the world.
Looking at history, however, the above seems unlikely. It certainly didn't happen in Rome--until it was forced on her by defeats. That will happen to us, unless we withdraw on our own terms. Now.
Thursday, May 13, 2010
Deficits You Can Hate or Love
There has been an almost unending stream of propaganda and false news about the horrendous deficits the US and now the EC are facing. Britons just tossed out its Labour government partly because of the hype about its deficit. The EC just went through a process for bailing out Greece (and potentially other nations) because of its large deficit. Right-wing media thumps out a drumbeat about the deficit in the US, and may win control of Congress in November, if people don't realize all the holes in their argument.
They argue that families can't borrow their way out of trouble, so the nation can't either. But families do borrow: when they take out loans to finish college or undergo training, for example. Both cases will enhance their ability to pay back the loan. On the other hand, to borrow in order to maintain a lifestyle beyond their income is unsustainable, whether it's to buy a house they can't afford, or to go out to dinner five days a week.
The same is true of governments. Greece's debt was unsustainable, because it was supporting a lifestyle, was not enriching the nation, and was not being paid for by the people with money: the wealthy, who avoid taxes.
The deficits in the US, insofar as they are paying for jobs protected, or jobs created, are investments in the future, and enable the recipients, and others downstream to pay back the money with interest as taxes they would not otherwise have been able to pay. Deficit spending to fund alternative energy, or highway construction and repair, are also investments in the future. They do not impoverish the nation: they enrich it.
On the other hand, deficits spent on wars that do not involve national survival, but instead are for imperial expansion (Iraq, Afghanistan), are like borrowing so that you can eat out every day of the week: the nation is impoverished by them in the long run.
US debt, while large in absolute numbers, is smaller, relative to the size of the economy (GDP) than most developed nations. But the deficit and debt hide both productive investment and wasteful consumption. The two ought to be separated and the latter should be cut to the bone, the former boosted to truly stimulate the economy.
The deficit we should be most concerned about is not mentioned much: it is the trade deficit. We buy more abroad than we sell abroad, in part because large corporations export jobs. That international debt comes back as speculation, boosting the stock market artificially; it does not employ more than the few thousands on Wall Street, but it impoverishes the nation.
So, cut war spending, boost job creation and stop outsourcing jobs. Then deficits become investments and the nation will become wealthier, instead of the Empire going bankrupt.
They argue that families can't borrow their way out of trouble, so the nation can't either. But families do borrow: when they take out loans to finish college or undergo training, for example. Both cases will enhance their ability to pay back the loan. On the other hand, to borrow in order to maintain a lifestyle beyond their income is unsustainable, whether it's to buy a house they can't afford, or to go out to dinner five days a week.
The same is true of governments. Greece's debt was unsustainable, because it was supporting a lifestyle, was not enriching the nation, and was not being paid for by the people with money: the wealthy, who avoid taxes.
The deficits in the US, insofar as they are paying for jobs protected, or jobs created, are investments in the future, and enable the recipients, and others downstream to pay back the money with interest as taxes they would not otherwise have been able to pay. Deficit spending to fund alternative energy, or highway construction and repair, are also investments in the future. They do not impoverish the nation: they enrich it.
On the other hand, deficits spent on wars that do not involve national survival, but instead are for imperial expansion (Iraq, Afghanistan), are like borrowing so that you can eat out every day of the week: the nation is impoverished by them in the long run.
US debt, while large in absolute numbers, is smaller, relative to the size of the economy (GDP) than most developed nations. But the deficit and debt hide both productive investment and wasteful consumption. The two ought to be separated and the latter should be cut to the bone, the former boosted to truly stimulate the economy.
The deficit we should be most concerned about is not mentioned much: it is the trade deficit. We buy more abroad than we sell abroad, in part because large corporations export jobs. That international debt comes back as speculation, boosting the stock market artificially; it does not employ more than the few thousands on Wall Street, but it impoverishes the nation.
So, cut war spending, boost job creation and stop outsourcing jobs. Then deficits become investments and the nation will become wealthier, instead of the Empire going bankrupt.
Wednesday, February 17, 2010
Cut The Deficit?
Cut The Deficits?
An overwhelming majority of small businessmen polled in northern New York, said that their greatest concern was the government's growing deficit. They said the government needed to cut expenditures, not increase them. It should also (somehow, not specified) encourage business. Analogies were drawn between a household and the government; one couldn't live beyond one's means as a family; nor could government, they insisted.
It's as if Keynes never existed!
A healthy portion of the deficit is from automatic stabilizers, like payouts for unemployment; the more unemployed, the more payments. Two benefits flow from this: people are not thrown into utter misery, and they still buy things, thereby sustaining some demand for goods and services. Without unemployment insurance, food stamps and other support payments, the Great Recession could easily have become the Second Great Depression.
How do you stimulate business when there is too little demand in the economy for whatever reason--in this case because of financial collapse? Do you cut government expenditures?
How, logically, would this help? If consumers aren't buying and businesses aren't selling--or buying materials, etc., how does cutting government expenditures solve this problem? Doesn't it make more sense that if government bought things (highway paving, bridge materials, labor), it might stimulate business, even if it meant a short-term increase in the government deficit?
Governments are not households; that's a false analogy. Households can't create money, or destroy it; governments can and do. Furthermore, if one household saves money, it is being thrifty, but if everyone saves money, if nobody spends, everyone becomes poorer. This is called 'the paradox of thrift.' It's what happened in Japan for the Lost (two) Decade(s): savings rates were too high. Business floundered.
It could happen in the US, and will, if there is no further stimulus and real jobs bill, or, if the only growth in the national budget is for "Defense." Defense spending is a poor stimulus. Not only does it use large amounts of capital for each job, it spends much of it abroad--"stimulating" Okinawa, for example, or Afghanistan. Also, it doesn't make the nation more productive, except at killing.
And yet, no politician would dare suggest cuts to "defense," the largest discretionary item in the budget.
Obama pretends he's listening: he's cutting discretionary spending in about 1/8 of government--for 2011--and yet he knows that what the nation needs is more stimulus. The government should spend more, not less, until we're in a solid recovery and unemployment is steadily receding. If there were no more stimulus to promote business, or prevent state and local government lay offs, then demand would fall and we'd be right back where we started: it's called a "double-dip" recession. That happened in 1937, and in the Third Century.
In Rome, that double-dip went on for hundreds of years.
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