Many, if not most, of the public policy decisions Americans are asked to deal with are so intricate and arcane we must rely on others to inform our opinions. But, are we making real decisions when our choices are so restricted that they omit real solutions?
Today, the nation is making such a decision: the size of the “stimulus plan”, which is among the single most important decisions our representatives have been asked to decide upon in generations. But are we, or they, any more qualified to answer that question than we are to decide on how much to spend on the new F(X)-28?
Let’s be honest. Most of us haven’t got the slightest idea about what instruction to forward to those we have elected. We may have opinions and prejudices but in quiet moments when we let our hair down and relax our posturing, decency dictates that we admit we have no certainty attached to our opinion.
To be fair, neither does anybody else, including the economists. Since this situation is unprecedented and key facts remain hidden, there is no practical experience with which to inform our policy-making.
All political and economic ideas are channeled through either the Republican or Democratic Party. Since both these parties share responsibility for the mess we’re in, to avoid accountability, the ideal policy for them is one in which they come up smelling like roses, having convinced us all that they actually saved the economy rather than ruined it. For movie lovers, this is akin to the hero tying the heroine to the tracks, and then appearing magically to free her from the onrushing locomotive.
The Democrats have blown the dust off the old Keynesian textbooks and seem to be prescribing government spending. The Republicans, making believe they never argued that unregulated markets will correct themselves, are taking cover in the shade of a Democratic majority, and relying on the old saw of tax-cutting. Neither party has suggested a thing that contains a scintilla of originality, and more importantly, displays any grasp of our contemporary economic situation.
When we surrender to the idea that we MUST accept one of those choices, we lose our grip on non-partisan facts. This crisis was caused by a demand-side scheme to artificially inflate real estate values. It is now apparent that not only were these schemes galactically stupid, short sighted and a colossal scam, it is equally obvious that despite the fact that they were morally bankrupt and indifferent to our national interest, they enjoyed bi-partisan support.
As we let this indisputable fact settle into our minds we experience an electric jolt of anxiety. It’s scary to realize that we’re now relying for a cure upon those that prescribed the disease. Even more frightening is the morbid truth that a majority of Americans enthusiastically support one or the other of these entirely irrelevant partisan placebos.
To swallow this palsied approach, hysteria also demands we ignore the facts of recent history. Didn’t we just have a massive tax-cut stimulus last spring? It failed, didn’t it? Didn’t we just have a massive bailout of the banking industries? That hasn’t worked either, has it? How many foreclosures have been avoided, how many jobs created?
Taken together with the trillions in liabilities assumed by the Reserve Bank and other Federal agencies, the total amount already committed dwarfs the size of the rescue program, even at its top estimates. In short, the choices we are forced to choose from are restricted to ideas from those that caused or abetted the crisis in the first place, all of which have lately been shown to be spectacular failures.
Why is this?
When it comes to the economy, because both the Republicans and Democrats are living in the past and accept guidance only from golden rules learned generations ago, neither group has developed policies that reflect contemporary conditions.
The first commandment of American foreign policy is “Thou shall not appease”. Whether we learned this at Pearl, Iwo, Omaha or Berlin may be an arcane question, but it is clearly a maxim inherited from the nineteen forties. In economics, our golden rule is “Thou shall not Protect”. This lesson was learned from the nineteen thirties.
Check your calendar. It’s not 1937.
Our economic fundamentals are completely different now. We are dependent on imported oil. We import far more than we export. Finance and credit are the icons of our maturity, clearly overshadowing the manufacturing virility that once characterized a powerhouse economy that allowed us to dominate global trade and run huge trade surpluses. Yet, our polity behaves as if nothing has changed. In these minds, globalization has not occurred.
Perhaps this is because it happened here first, long ago in a time called the “fifties.” We think we can ascribe to our economy the same sort of “excepionalism” that defines our diplomacy. It’s been quite a while since “Our Town” disappeared, since “Main Street” was more than sappy political rhetoric, and a “Village” existed anywhere except fairy-land. The malls, suburbia, the slums, the chains, the international conglomerates, the mold of sameness resultant from capital injection, all represent the globalization of America that was essentially complete decades ago. The ravages of global economics are not restricted to the Third World; they happened here first, and they have gone on the road because the mother lode over here has played out.
It is this “exceptionalism” that leads us to believe that we can prosper apart from economic reality. Because capital is fungible, and can be invested with equal ease anywhere, those that speak for investors are not out of joint about globalization. If manufacturing has moved overseas, they are eager to finance the action. The long-term effects of this capital flight following manufacturing flight are not considered by those that have a short-term, bottom-line mentality. This score now, pay later attitude is not restricted to the Republican Party.
It is also the position of those running the Democratic Party - even if they never heard of NAFTA. Though they would like their constituents to think otherwise, the truth is there is little difference between the fundamental support of unfettered free capital between the Democrats and the Republicans. They differ from conservatives only in how they feel the wealth should be distributed - they assume that the fatted calf will continue to produce cream indefinitely. This dreamlike belief that a healthy economy is an entitlement may seem less brutal than the “make it where you can” mentality of the “other side” but in fact leaves us equally unable to deal.
As a result, we have no national industrial policy. We prefer to rely on “exceptional” dream-works. For only in a dream-world could the belief that shipping our industry overseas and financing foreign manufacturing will result in a stronger America. Yet, these grotesque fantasies represent the “choices” we are being presented with.
Because we have no industrial policy, we have no ongoing programs designed to expand job growth in the private sector. We are forced to turn to off the shelf remedies that have been gathering moss for generations. If we had an industrial policy in place, designed to encourage and support manufacturing here, instead of wherever the lowest coolie-wage prevails, extra government spending on those programs would result in both immediate and long term job growth and wealth creation. Because that is not the case, our choices are limited to one-shot giveaways that will do nothing to alter the long-term trajectory of our economy. This “bi-partisan” approach advises us that we should hugely increase debt in order to create temporary non-recurring jobs. These public financed jobs are revenue negative; they do not create wealth or expand the tax base. However, this “shoot-up and nod out” approach is called a “stimulus package”
We must rise up in this nation among those not infected by partisanship a new body of consciousness capable of dealing with realities. While the herd in D.C. is stampeding around in a panic, it is as good a time as any to begin.
The wisdom of economic policies that furthered the interests of a dominant manufacturing nation seeking markets for its excess production has become today only a sad shibboleth.
We need new commandments.