The Great Recession, Part II

Nobel Prize winner Joe Stiglitz:

The remedies to the U.S. deficit follow immediately from this diagnosis: Put America back to work by stimulating the economy; end the mindless wars; rein in military and drug costs; and raise taxes, at least on the very rich. But the right will have none of this, and instead is pushing for even more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the U.S. economy in peril and that shred what remains of the social contract. Meanwhile, the U.S. financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous, disastrously carefree, ways.

But matters are little better in Europe. As Greece and other countries face crises, the medicine du jour is simply timeworn austerity packages and privatization, which will merely leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America, and elsewhere, and it will fail in Europe, too. Indeed, it has already failed in Ireland, Latvia, and Greece.

There is an alternative: an economic-growth strategy supported by the European Union and the International Monetary Fund. Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth-enhancing investments. Growth itself increases tax revenues and reduces the need for social expenditures, such as unemployment benefits. And the confidence that this engenders leads to still further growth.

Regrettably, the financial markets and right-wing economists have gotten the problem exactly backward: They believe that austerity produces confidence, and that confidence will produce growth. But austerity undermines growth, worsening the government’s fiscal position, or at least yielding less improvement than austerity’s advocates promise. On both counts, confidence is undermined, and a downward spiral is set in motion.

Do we really need another costly experiment with ideas that have repeatedly failed? We shouldn’t, but increasingly it appears that we will have to endure another one nonetheless. A failure of either Europe or the United States to return to robust growth would be bad for the global economy. The failure of both would be disastrous—even if the major emerging-market countries have attained self-sustaining growth. Unfortunately, unless wiser heads prevail, that is the way the world is heading.

3 thoughts on “The Great Recession, Part II

  1. Since many of Obama’s cuts will come out of SocSec and Medicare, the 65/62 and over demographic, there will be a disproportionate cut in income for the elderly. A huge percentage of those people already spend every penny thay have coming in, as for many they have mostly –or ONLY– SocSec. It will mean people losing their homes, either houses they can no longer afford to pay taxes on or apartments. Housing prices will continue to go down, as more come on the market; so, even when they sell out, they will get less than expected as of right now.

    This will mean even less money available for seniors to purchase food. They’ll be buying cheaper, possibly less nutritious types of food. They’ll probably have to give up buying vitamin supplements,as Medicare RX doesn’t cover that. They’ll be purchasing fewer of the high co-pay prescription drugs or taking smaller doses to stretch their prescritions. I imagine there will be effects I haven’t thought of yet. Oh, yeah: Heat. Electrcity. Gas. Other transportation.

    This will be a big hit to the economy, but, I guess Obama figures with less health care seniors will die off earlier and faster, and that will also cut the need for Medicare expenditures and SocSec outlays. Hey, it’s a Plan! Whooohooooo!

    My, what a view for an ostensible Democrat to hold! But I always figured he didn’t really think of himself as a Democrat; he ran under that banner because as a black man that was how to get elected in Chicago and then Illinois, and for sure how to be elected president. A flag of convenience, were he a ship.

    Damn, a Dem who believes in Cheap Labor and Hurry Up and Die! Sounds like a Republican to me. And, just like a Republican, Obama will probably go with the COLA “adjustmen” for SocSec since he probably does believe seniors get too much already, and they need to get a “haircut” on those cost of living increases. And it’s sneaky enough so he can lie about it to the voters.

    Note that Obama’s doing this just in time for the Baby Boomers* to start receivng SocSec and Medicare. Since the O’Neill/St. Ronnie “Grand Bargain,” everyone has been paying forward (meaning more) on their SocSec taxes, to ensure there was enough money to cover the bulge. Now, these Baby Boomer payers are going to get cuts to their payments. For those close to or now on SocSec, it means they’ve also probably lost in savings due to the banksters playing around with Credit Default financial gambling. Or have used savings to live on since they were downsized or forced into early retirement…. Nice, huh?

    The bottom line is there will be even less money for the poor and lower economic strata to use to purchase goods and services. There will be less demand in the whole economy. There will be job cuts as various companies are not making sales which fund the wages of their workers. There will be lower taxes and more state and local job cuts, service cuts.

    Obama is setting us up for a double dip –or, more accurately, a deepening of the recession/depression we’re already in.

    We wuz robbed — of the opportunity to have a Democratic president during a period of severe economic turmoil. Of the chance to remedy some of the most egregious wrongs with our financial system. Of a chance for single payer health CARE.

    We wuz robbed…. Ah, maybe that’s part of living in an Oligarchic Kleptocracy.

    As Buffett said, there is class warfare and his class has won. Big time, as Cheney might say.

  2. *Baby Boomers — I always felt Obama had a strong antipathy toward Baby Boomers, especially those who were activists in the 60’s and 70’s. Strange, and I can’t prove it, but I sense only negative vibes toward us Baby Boomers.

  3. The Marshall Plan worked. Guess we need a war first. If China tried a Marshall Plan for us now the rich would steal it all.

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