Moving Forward, Part One – Deficit Spending
There is much debate at the moment over President Obama’s budget proposal and what it would do to the budget deficit.
First off, some basic economic theory that I haven’t seen mentioned by politicians of either party or any of the alleged “news” media. Capitalism has up and down cycles. It always has, and it always will, because each cycle gets exaggerated by a different bubble or bubbles. The Cylons have a saying: “All this has happened before and will happen again.”
So how do these bubbles start?
They start with a new idea that works, which then gets copied enough to become mainstream, at which point it is no longer wildly profitable unless you come up with a marketing twist that adds no actual value to the world other than to move money around. Eventually enough people realize that the emperor has no clothes, and the bubble bursts. It happened with the dotComs, it happened with the Enrons and MCIs. Those were traumatic to a few people and industries, but the economy as a whole recovered quickly enough because the middle class in general was not threatened by those scams. When it happened with gimmicky mortgages, the whole world got screwed. This will be a whole article on its own very soon.
What should government’s role be?
Government’s role in these cycles should be to move “anti-spinward” to try to keep the cycles from going too far off center. When the economy is booming, government should be running at a surplus, so that when a down part of the cycle is reached, there is money available to pump into the recovery. At that point, government runs at a deficit until the economy recovers, at which point government should then pay down any overall deficit incurred and resume building a surplus for the next cycle.
The problem we face now is that during the prosperity of the mid 2000′s our government ran at a deficit instead of a surplus. Never before in history has a country fought two wars while cutting taxes. We gave tax breaks to oil companies while they were recording record profits on historically high oil prices in part caused by the wars we were fighting with borrowed money.
So we are now faced with a situation where the government should be running at a deficit to alleviate the worst economic downturn in a long time. We should be coming together to fix things. Instead we have politicians who would rather things got worse as long as they can’t get credit for fixing them. And a media and public who can’t seem to tell the truth from the blame game (I am referring to the Republican response of “See, he’s being partisan” to Obama stating “I inherited this mess”.)
So we bail out the “too big to fail” corporate perps who got us here, and debate moving forward vs business as usual under the guise of people vs small business. That’s the biggest PR lie since “trickle down economics”. Senator Judd Gregg (R-NH) said “It is the individual American who creates prosperity and good jobs, not the government.” What he should have said was “It is the individual American who creates prosperity and good jobs, not the government or the large corporations it works for.” Because the rest of his platform calls for business as usual, which means people and small business get to keep subsidizing bonuses for committing fraud.
