Monday, June 21, 2010

Back off, Deficit Hawks!

17% unemployment, 24 million out of work, bread lines wending their way from 10- 20 blocks in every major town and city, food riots in some places, rampant increases in crime (mainly robberies) and strapped police departments that can't keep up - especially having had most of their manpower cut in half. Banks closing down, and virtually no credit to speak of.

1933? Great Depression?

Nope, more like March, 2012, and the 2nd Dip of the Great Recession- but NOW a 2nd Great Depression, because too many people were too stupid to see the writing on the wall and act in an intelligent way.

Here's the skinny, which is not that hard to follow even for non-economically versed folks: we are still in a dicey economic environment and by no means "out of the woods" in terms of recovering from the Recession that started in late 2007. To put it in the most summary terms - the demand side of the economy is still on life support. That means people aren't buying, banks aren't lending, and employers aren't hiring.

People aren't buying because there are still 15 million out of work - who - if congress doesn't get of its ass and pass the unemployment benefits package (to extend benefits), will have to begin going onto welfare. This is even as states begin major cost cutting of benefits. Now, if millions of these folks can't get jobs, can't get unemployment benefits extensions, and are unable to get onto welfare rolls- just where do you think they will turn? (Well, to give you a clue, as Barbara Ehrenreich put it quaintly in her latest book, "at least there's some place they can get three hots and a cot")

Other people, still working, see their wages still stagnant and many benefits slashed, and are logically pulling in their pocket books. They don't know if they'll still have a job next week or next month, so the smart thing (for them) is to reduce spending. The problem with that is that companies that sell goods and services can't make any money, not even a minimal profit - so they can only stay afloat by either not hiring new workers, or laying off existing ones (with the remaining workers taking on the jobs of those dismissed, along with seeing benefits sliced).

Into this demand vacuum we have the choice of a bit of government stimulus to keep things going until the economy revs up enough that the private sector begins hiring again. The problem is there are Nervous Nellies in the Senate, who don't want to sign off because well,.....this is an election year and (as we know) all American pols care first about re-election as opposed to their nation's welfare, and second,...they don't want to be seen adding to that $1.7 trillion deficit. Not even if it means extending a hand to millions of drowning citizens (by the end of this month, 1.2 million more will be cut off from unemployment benefits, unable to pay bills, or feed their families)

Bear in mind now, this is occurring in an environment for which we have FIVE job seekers for every job. That means even if the 1 in five get the jobs available, 4 in 5 will still be left without and need help.

Where does this mentality come from? It has issued from so-called "deficit hawks" - probably driven by the Tea Partyers' "concern" about the exploding deficits, never mind the average Tea Partyer (despite claiming to have a university education) couldn't pass Econ 101. These nitwits are all het up on canceling any extension of unemployment benefits, but they're perfectly okay with giving at least as much to wealthy hedge fund operators in tax breaks, even as they're perfectly happy to keep piling on $40 billion every few months for that useless adventure in Afghanistan.

John Maynard Keynes, one of last century's greatest economists, was probably the first to explicate what's been called "the paradox of thrift". Contrasting to the (then, in 1931) British version of today's deficit hawks who insisted that continued government spending sucks money from the private sector, Keynes noted that demand can fall far short of supply. He added that if and when this manifested, governments ought to increase, not reduce deficits - to compensate for the deficit in private spending.

This is exactly the same situation we behold now. But that deficit spending for a constructive cause (the unemployment benefits, as well as extended Medicaid benefits to the States - which nearly 30 governors have called for, including 13 Republicans) is being held hostage by a ruse known as a "supermajority rule" wherein Senators no longer have to stand for hours on the Senate floor and filibuster - they merely have to say "I will filibuster if you allow such and such ...bill"

This is why we see even 56-40 in favor of votes unable to pass the legislation. What is needed is to kill that supermajority idiocy and force those obstructionist deficit hawks so concerned about exploding deficits, to get their asses on to the floor of the Senate and read those whole bibles and telephone books for hours. Let C-SPAN then televise the spectacle of these selective deficit imbeciles to the displaced workers, denied a lifeline!

History records that rather than respond to Keynes, the British Labor government in 1931 passed an emergency budget, replete with austerity, which caused Britain to founder even longer in the economic doldrums. As Keynes was quoted as saying to an American observer:

"This budget is replete with folly and injustice! (It's backed by) every person in this country, of super-asinine propensities, everyone who hates social progress and loves deflation, feels that his hour has come and triumphantly announces how - by refraining from every form of economic activity- we can all become prosperous again"

But this is what the fudge-filibustering, Senate selective deficit ninnies are all about.

One just hopes they're also aware of the coming meltdown of the economy as all sorts of tenpins go down in order.

Meanwhile, we have other idiot cutters-deficit hawks sitting on Obama's "Entitlement Commission" who insist they aren't about cutting Social security at all- oh no, just "stabilizing it". The chief among them is the Wyoming blowhard and former Senator, Alan Simpson, who was buttonholed after one session with congress - pressing him for possible SS cuts. Readers can catch the youtube version here:

In a previous blog, I drew attention to Simpson's folly so won't belabor it again, but those who missed it the first time can catch it here:

We have to hope that any final decision on "adjusting entitlements" doesn't go in any direction on offer from this clueless miscreant moron, who never should have been placed on any commission designed to examine budget cuts (and especially as co--Chair!)

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