IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.Read the rest here.
More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
Hat Tip: T-19
4 comments:
I wonder if we were to implement austerity measures now how quickly we would be in great depression conditions?
Anon,
That is the policy maker's conundrum: let the deleveraging happen with all its harsh fallout, or keep borrowing from the future and hope things stay intact through the next election cycle. Eventually, we run out of future from which to borrow.
TANSTAAFL - overvalued assets must fall in price, bad debts written off, malinvestments liquidated, etc. The longer we put things off the worse they will get.
Production is currently greater than consumption and capacity is greater still than current production. Therefore the only real question (I say real here as in real property) is who gets to have what based on how many little pieces of paper say so.
Austerity assumes there isn't enough of something to go around. But in nearly every aspect of the market there is (particularly in the areas most of us live like food, fuel and housing).
What will happen is a massive redistribution of wealth and wealth potential from debt holders (who will be trashed) to debtors (who will be excused because there is nothing left to enforce on them).
The moral hazards will be many and unavoidable. Certain markets will glut and others will starve (starve for product not food) and one of the largest global social upheavals will happen without a shot being fired (because there's not enough bullets in the world to fire at everyone at once).
We can all claim that everyone is indebted for the rest of their life for everything always, or we can all wake up one day and realize it was a mistake and reset the account numbers and move on. We'll see which one outs.
In the Old Testament, there was a Year of Jubilee where all debts were cancelled. And people were forbidden to NOT be generous with loans during the few years before a Year of Jubilee, so there were always people who "won" (those with debts) and those who "lost" (those who were owed)
But every 50 years, there was a clean slate and a chance to start over.
It would be brutal, but that is just what we need.
The problem isn't tax and spend vs borrow and spend. The problem is spend.
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