Not a good reconciliation on the budget

Posted on January 25th, 2008 in Economy,General,Politics by Robert Miller

It pained me to see Pelosi, Reid and Bush standing side by side yesterday to announce a budget cut to stimulate the economy and help steer us through a recession avoidance pathway. First, the agreement is pathetic. For most middle class wage earners, the so called stimulus package will amount to about $12.00 a week for the average consumer and it provides no assistance to the states, who need to have a balanced budget each year and will face a large share of the burden of unemployment and decreased economic activity. It is a paltry gesture by any standards, but that image alone points out how closely aligned the two parties are with respect to economic policies and how far apart they are from people like me and a growing number of others, as well as a large number of economists who believe that the purpose of government is to prevent financial calamities and not be the cause of them.

Everyone in Congress and the White House knows that we are not facing the prospects of a simple downturn in the economy, that we are facing at least the possibility of a widespread shift in consumer confidence that reflects a growing public sentiment, built up over thirty years of deregulation, stagnate growth in incomes, huge public and private debt, corporate downsizing and a sense of public despair that America has no promise of a bright future for them or their children. Americans are finally beginning to see that the continuous rhetoric of America as the only “superpower” has no meaning for them and has given them no tangible benefit and no indication that their role in America is to be anything other than an intense consumer. Sort of like connecting one of those huge milk producing cows to a machine, so that she produces huge quantities of milk all day, despite the boring life style: she eats at one end and gallons of milk come out the other. Consumers have long indicated that they are willing to be the consuming cow, but not enough is going in the front end to get something meaningful out of the rear.

There is the very real possibility that this recession, if that is what we are headed for, will be a permanent contraction of the middle class, large numbers of whom have already been spending beyond their means. The problem with the sub-prime disaster is the lack of control and regulation over the financial industry and everyone knows it. The sub-prime lenders were started by the big banks, like CitiCorp and others. So, it’s not a matter of reigning in upstarts and renegades–these are supposed to be the banks that, when deregulated, would do a better job for us and our economy than if they were regulated by the Federal government. Our deregulatory pattern of the past is not Republican vs Democrat, because it was actually started by Jimmy Carter (remember the deregulation of the airline industry?) followed by a large surge from Ronald Reagan and Bush I; but Bill Clinton lined up in the deregulatory column and Bush II has managed to almost eliminate any federal regulatory controls. Much of the Federal bench is filled with “deregulatory” judges, so their decisions always come down in favor of business and industry–look at the atrazine outcome and multiply that decision over the thousands of others, most of which we don’t know much about and you get some idea of who is running this country and for whom it is being run.

Unless you are in the financial industry, it is hard to look at our economy and see any plums out there. A long history of huge military expenditures, the lack of investment in our own education system and infrastructure, the ease with which we allowed our manufacturing base to slip away, the isolation of science and technology from participating in our economy and decision-making and the lack of public outrage when long-term employees, whether white or blue collar workers, got fired before they got their gold watch. The blue collar worker of Ford to a McDonald’s employee transition or the executive to cab driver motif are both components of the same syndrome: a deregulated economy so that our national wealth funnels towards the top away from the bottom. We don’t need someone to make us feel good, we need a policy and some people to implement it so that we have a tangible claim to a better future.

The Democrats have an opportunity to put this huge disaster of a presidency, that of GW, not on GW himself, but on the entire conservative agenda, which has failed us twice in this century. The credit-loose, fly by the seat of your pants economy that got started under Carter, who initiated the first deregulatory policy changes, followed by accelerated surges in this direction from all other administrations has created a political climate where most of the presidential candidates out there promise more of the same. Band aids to fix a hemorrhage. What Reid and Pelosi should have done is demand a major overhaul of the mortgage credit industry, and get the people who lost their homes back into them….pronto. The methods by which one can due this are well known to good economists like Robert Kuttner who you can listen to on Democracy Now. Looking at the images of Pelosi, Reid and Bush standing, smiling and claiming to have found a historic agreement, when what they have delivered is nothing more than stoking the fire, using the same logs as before. Perhaps it will work again, but it is clear to me that we do not have the national narrative that we need to make our economy work for all of us and use intelligence to solve our international problems, rather than cluster bombs and the weaponization of space.

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