Sunday, April 24, 2011
American Economy Needs Resurrection
Before it dies, the American economy needs Resurrection with a capital "R."
Forgive me for sounding a purely political tone on Easter Morning, but the facts are staring us in the face.
Based on the latest estimates after all the dust settled over the deficient and delinquent 2011 budget settlement, we will bump up against the debt ceiling around May 16th. We narrowly avoided a government shutdown for failure to pass a working budget through the end of FY 2011, and now we are staring at it again.
Many in the conservative ranks (myself included) would like to see an up or down vote on some version of a Balanced Budget Amendment in the Senate as the quid pro quo for raising the debt limit. There must be a plan in place this time before the debt ceiling is increased again. Whatever the actual day of hitting the debt ceiling is, time is running out of the hourglass. The only reason you're not hearing much about it is Congress is enjoying its Easter/Passover recess.
I was remembering the other day what happened in September 2008. I hailed the House for voting down the first proposed Bush administration $600 billion bank bailout. The stock market saw it differently and took a nose dive on the news. It wasn't just a "blip" either -- it tanked the next day in a 778-point free falling nosedive. Panic set in and the Senate hastily passed the $700 billion TARP and sent it back to the House, which approved it the second time. The floodgates for spending were flung wide open and the debt mounted exponentially.
Even last week on just a whiff of bad news with the S&P's credit warning about its negative view on America's credit standing, the stock market experienced an immediate and sharp sell-off. We're now poised to do something dramatically different than just throwing more money at the problem.
Both parties are feeling the heat as another game of who blinks first begins to take shape. Neither side won last time. Taking .068% off a $3.7 Trillion budget can hardly be hailed as a victory for either side, despite all the credit for "historic" compromise that was being trumpeted from Capitol Hill on both sides.
I predict there will be yet another accommodation when the debate sparks up again, and there won't be a government shutdown. Neither side can benefit politically from it, so it won't happen.
It is my belief the House Speaker John Boehner and the majority of other mainstream GOP leaders agree on the need to raise the debt limit. Having said that, they are listening to the persistent voices of the freshmen who were swept into office in the tsunami of the 2010 mid-term election, and they don't want to be held liable for a new financial meltdown caused by failure to aggressively go after major spending reductions. It appears to me we need both.
There seems to be little cooperation visible yet from the White House, however, and the Democrats still control the Senate. Hard line liberals think Obama has already caved too far (hard to believe), but to win concessions they seek the Republicans need Obama to offer much more than he has been willing to give so far on spending cuts.
Here's what's at the root of the impasse, as I see it. It's been hard to agree on what's even causing the deficit spending. You cannot discount the reality of the deficit spending for Bush's two unfunded wars in Iraq and Afghanistan. Then there's the much-maligned "Bush-era tax cuts." People argue that Obama has pushed us into a socialist society, but how can hard line conservatives explain away Bush's profligate spending for an expensive prescription-drug program inside Medicare?
On the other hand, Republicans will blame excessive government spending as the reason for deficits, and under Obama we have seen nothing but government spending on steroids.
All of that may seen like political hyperbole, but a deep and protracted recession -- the Great Recession -- is causing the slow and painful death of the American economy. What's really happened is that with so many Americans out of work for so long, drastic reductions in tax revenues have been replaced by hundreds of billions of dollars in well-intentioned stimulus spending under both the Bush and Obama administrations to replace the missing tax revenue.
Rather than stimulate the economy with debt and deficits, the borrowed stimulus money has done very little to ignite and revitalize the economy. Income solves everything in Management 101, so let's figure out how to promote policies to increase the GNP in the private sector.
When the government keeps extending unemployment benefits there is a marked disincentive among job seekers to find new employment. It's evidence I see every day of the entrenched welfare state in America. When potential new hires have to discuss with me how few hours they can work to keep their unemployment benefits, I know too many have been drinking the government entitlement welfare Kool-aid.
The total national debt before the recession was $9 Trillion in late 2007. Today, four short years later, it has burgeoned to $14.3 Trillion, nearly 90% of the GNP. Even the federal government cannot continue writing blank checks forever. Sooner or later the holders of our debt will demand high interest rates as their perceived risk increases, unless we as a people give a clear signal we are serious about reining in our appetites.
More government spending is not going to cure the problem. More taxation is not going to offer a cure either. What is needed now is a voluntary and cooperative effort by America's leadership to resurrect the economy through a combination of aggressive across the board spending cuts and tax policy that favors new entrepreneurial activity. That will put America back to work quicker than "quantitative easing" ever will. We're running out of time and accounting tricks to cover the root cause.
We are way past the time when we need more wrangling over the class warfare arguments of whether or not the rich should be taxed more heavily and the poor should be given more entitlements to save them.
Resurrection is possible. I loved what Joe Scarborough, MSNBC's token conservative, tweeted about it the other day -- "only a fool would bet against America." Give a listen to Carrie Underwood and remember that with God we can do anything:
Where the physical body is concerned resurrection is an absolute certainty. Where the body politic is concerned, it is an immediate necessity. With God's help we will survive and Zion will come.