There’s a great deal of silliness and sophistry about the economy at this dangerous moment, but why should it be different from anything else in American life?
Washington debates a “stimulus” package of tax cuts and newspapers write headlines to tell “average readers” (whatever the hell that means) that the feds will put hundreds of dollars in their pockets. Wall Street does a dead-cat bounce and commentators who were darkly warning of recession are now talking about a miraculous comeback. In the New York Times, the normally sensible David Leonhardt was saddled with a headline that emblemized the silliness: “Worries That the Good Times Were Mostly a Mirage.”
In reality, the economy risks finally tipping over from a series of imbalances and forces long in the making. The Fed is very limited in its ability to right the ship. And any “stimulus” risks making things worse, aside from extending unemployment benefits, which is somehow anathema to “conservatives.”
Those forces include: a collapsing housing bubble and subprime mortgage bust that can be directly blamed on Alan Greenspan’s BubbleFed and criminally lax regulation, as well as the greed and arrogance of the banking industry; sustained higher energy prices; a collapsing credit bubble heavily fueled by a stagnating middle class that still kept spending, and unsustainable federal deficits, trade deficits and overseas borrowing, especially from the Red Chinese.
But dig deeper.
We’re starting (but only starting) to pay the price for decades of overspending, undersaving, underinvesting in education and infrastructure, eviscerating an industrial base and middle class that it took a century to build, and failure to start moving toward more sustainable practices. Global warming, global competition and a new global energy paradigm of rising prices and declining oil production. All these monster chickens are coming home to roost.
None of this is being addressed by policymakers. Tax cuts to business will mostly be used to further send jobs and capacity overseas. Bribing the middle class to go spend at Wal-Mart will only further the bread-and-circuses of spending, watching celebrity “news,” and working in call centers. The lost tax revenues will make it even more difficult for the U.S. not only to compete but to prepare for a very different future than that imagined by those stuck in the late 20th century. Schools will be further strapped. Rebuilding the American passenger train network will be again ignored.
Anyone paying attention has noticed these forces gathering power for several years. The 'good times' celebrated by the Times' headline writers were very good on Wall Street. Most Americans saw their incomes stagnate as poverty rose, benefits fell and good jobs became more scarce. And that was the cycle in an expansion.
The question is how bad must it get before we wake up.
Comments