Saturday, September 13, 2008

Economic Disaster: A Primer for Republicans

To start, a graph:

What this shows us is that in the years since Republicans became "Fiscal Conservatives", our national debt has grown by $1 trillion offset by the $200 billion surplus created under the rule of a "Tax-and-Spend Liberal." As my daddy in Kentucky would say, "I don't think we can afford no more of them."

Last week the Bush Regime decided to rescue another pair of failed businesses, Fannie Mae and Freddie Mac. In so doing, he may have averted a global financial meldtown but according to Jim Jubak at MSNBC, the benefits of the bailout accrue to the Chinese, not the American taxpayer. Some of the downers, the bailout:
  • Increases the debt on America's books by $5 trillion.
  • Of that, the government will either have to raise taxes or borrow between $25 billion and $200 billion.
  • This will increase interest rates.
  • Which can increase inflation due to the increase in the money supply.
  • Which could reduce the United States's debt rating, resulting in more interest payments on the debt.
All of which mean low economic growth (given the Government's biased reporting, recession if not depression).

  • The Chinese make out like bandits:
  • The investments they'd made are now secured by the Government of our country.
  • The Yuan is in good shape for a long time.
  • They can now interfere in their financial markets as much as they please citing the United States as an example (financial version of the Russians justifying their invasion of Georgia with the United States's Iraq example).

Invest abroad, the US economy is tanking, helped out by an ill-conceived and badly executed bailout of a struggling business by Bush appointee Paulson. (But wait until the US economy truly tanks, sometime next year, before investing in the foreign stock exchanges).

Zooming back in to focus on the individual, worker confidence is at its lowest level since the 2001 recession. One third of workers report they don't have enough money to make ends meet. And interestingly, workers reported when laid off, the responsibility to help them isn't completely the government's (about a fifth answered this way). The majority said the responsibility lay with the Government, themselves, the companies and other agencies. Sounding more and more like Sozialmarktwirtschaft to me.

I just love Freakonomics, a New York Times blog on economics but not the old, boring supply-and-demand kind. These guys report on the books of gang members to find that an average gansta makes about $2.00 per hour, not the picture most would like to have painted. Anyway, they had a blog not long ago on income equality, a guest post from William Bernstein. The economics of growth inevitably lead to inequalities in income but when policy encourages it, the results can be devastating. Current income disparities match those of the Robber Baron capitalists of the Gilded Age. And the problem is income is not measured absolutely, but relatively. When I'm eating lunch at the Perfect Landing at Centennial Airport and I see someone getting off a Gulfstream with a hunting rifle in his hand, I don't feel rich, even I'm enjoying a better meal than 99% of the planet can enjoy. Read the rest of the article - there are a number of other disparities that track income disparity: Education, obesity, life expectancy, the list is long but most important is a point I've made a number of times before: There is no correlation between tax rates and economic growth. Get it? There is no correlation between tax rates and economic growth. The best mechanism for decreasing the gap? The inheritance tax.

Now it's time for another chart:
It had been declining, roughly, since 1992. What things happened then? Clinton was elected President and eliminated a number of tax cuts. Poverty began to drop until about 2000. What happened then? Bush was elected and implemented new tax cuts. It would be interesting to see the twelve years prior to 1992 but I can make a prediction: The trend was upward. In short, it seems tax cuts do have an effect on poverty or put another way, there's a correlation between tax cuts and poverty increases. Goes against supply-side economics. There's an article I'll digest later in the week at the Center for American Progress but if you want to read ahead, here's the abstract: There is a nugget of truth to supply-side economics but like most right-wing ideological points, rigid application yields expected consequences, in this case, economic disaster.

Right-wing economics doesn't work. We don't want another minute of them, much less four more years.

Cross-posted from A Colorado Progressive.


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