Saturday, August 6, 2011

Looking at Doom Dreaming of Paradise

Sometimes you don't want to be right. I've been a huge pessimist about the economy on this blog since it started. Moreover, regarding the recent budget deal I had to agree with Congressman Emmanuel Cleaver from Kansas City, Missouri who called it, "a sugar coated Satan sandwich".

Now we've got big problems. Standard and Poors just downgraded our credit rating last night. The budget deal contained no revenue increases and the GOP promised to not allow revenue increases in the future when the so called Super Committee revisits the budget. More importantly, there is now established a precedent to continue huge battles about the debt ceiling in the future. So, if a nation will not raise any money and will periodically threaten not to repay creditors, what kind of an investment risk does that make us? Are we sure that we even warrant the AA+?

There is a good fix for this, and there is the fix we will probably adopt. Let's start with the bad and expected fix.

There is a good chance that ideologues in this country will use the economic scary times to completely dismantle the already patchy social service net. Although S&P mentions failure to raise taxes more than failure to cut spending in their reasoning, there is an element that will concentrate on cuts. Not just any cuts, but cuts to Medicaid, Social Security, Student Aid, ESEA funding, and of course regulatory agencies such as the EPA. We could actually be looking at an America that resembled Hoover's America of our parents' or grandparents' day. This is a bad fix.

Further cutting of domestic spending in the current economy will deepen the recession. Estimates of job loss for the cuts currently on the table stand at around 1.8 million. The US will have trouble surviving that loss, let alone going back for more.

The good fix in my mind is as follows. First, the President should declare that there will be no more debt ceiling fights in the future, because he will simply invoke the 14 Amendment and raise the ceiling unilaterally. Second, we should go after revenue from the two sources that still have money, the top 1% of the wealthiest Americans and corporations who are sitting on more than $2Trillion and not hiring US workers. Third, we should cut corporate subsidies such as the outlandish practice of giving oil companies hundreds of millions of dollars annually. Fourth, we should impose a rapid trades tax on Wall Street. Current trading has nothing to do with investment and everything to do with speculation. Shares may be held for weeks, days, hours, or even minutes by speculators using computer trading. On shares held for so short a time which are obviously not investments, there should be an escalating tax. Fifth, we should complete the exit of troops from Iraq including the many private soldiers hired there, and leave Afghanistan, and when troops are safely home, make the Pentagon live within a reasonable budget for the first time in 70 years.

Finally, we should actually spend money. Our transportation system is a joke. We should join the rest of the world and have this country crisscrossed with commuter trains; from cross country bullet trains to in- town trolleys. Our infra-structure is crumbling. Ironically, a lot of it was built in the last Depression to create jobs under the Work Project of America. And we are still hiding our head in the sand about climate change and the resulting extreme weather. We should be moving to green energy and we should be honest and figure out if we will need to change agriculture growing locations and even if we will need to move people from some areas that will not be inhabitable either because of flooding or drought and temperature.

Underlying it all will be the need for a good public education system that includes tuition free college (once again something the rest of the developed world has had since WWII).

All of these things are of such enormity that only the federal government can take them on. However, all of these things create jobs and grow the economy. They are big, pie in the sky the ones that built this country to begin with.

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