So we are caught on a fence, given two options, problem is neither of them will offer much help. So let's try some straight talk on the economy, if we can hang up the ideological baggage for just a minute.
On the one hand we are offered the promise that reduced taxes and a smaller less intrusive government will restore vitality and prosperity to the economy. Well it would be depend a bit on what is supposed to happen and what would really happen, if we actually shrink the government and reduce taxes and regulation the picture would be mixed. The reason being you are subtracting something from the economy at the same time you add something. You add the boost of lower taxes and regulatory costs but you subtract government spending. This is a real subtraction also because government spending is largely debt spending. This means that by reducing government spending you don't really free up cash to be spent elsewhere, that spending just goes away. Now it is very easy to say that, yes but it still requires hard cash, the government has to spend hard cash even if the spending is debt driven. True but cash, or liquidity, is not the issue, there is plenty of cash out there, the business/financial/consumer parts of the economy just don't see any compelling reason to spend it, in fact they reasons to not spend it. So if you do drop taxes and regulation and drop government spending you may not gain anything at all, you give with one hand and take with the other. Now if you do what has really happened the last two times conservatives held the white house which is lower taxes and regulation while increasing spending then you do have a boost, but that only digs our debt hole deeper. And that won’t work because the consensus is so strong against debt spending right now. It will only ruin your ability to debt spend when you really need to.
But even if the conservative path did work. Even if reduced regulation and taxes did grow the economy it would take too long to help many people. No matter what you believe accept this fact. It will take years, years mind you, of robust growth to reduce the unemployment rate. So if you are one of these out of work marginally desired workers, an older worker with outdated skills, or a younger worker, or a non-white or male worker, what do you do for the next four or five years while you wait for the economic revival to catch up to you? That is how long it will take even if the economy grows well for unemployment to get back to the 5% range. This isn't the kind of thing where we will wake up tomorrow and the future will be bright. It would take years of hard work to get the economy back to where it was, and there are a lot of people out there that can't wait four or five years to get back to supporting themselves.
O.k. so now on the other hand we are offered the promise that a new round of government spending will get us back on our feet. That it will jump start the economy, decrease unemployment, increase confidence, and lead to increased spending, lending, and investment. Well this may be true if we are just waiting out a business cycle, and it may be true if we target the investment in areas that will really pay, after all we still are benefiting from a lot of the infratructure investment made by the government decades ago. For instance where would the U.S. be without the interstate highway system? That is just one example. Unfortunately if we are just waiting out a business cycle then the same applies as above, it will take years for us to put this bad patch behind us, it's not like you will spend a trillion dollars and the unemployment rate will go down to 5%. So you have years of extending unemployment benefits and supporting government jobs. And as far as investing in our future Washington is showing very little vision when it comes to public spending, personally I don't have a lot of faith that Washington can go beyond window dressing when it comes to things like sustainable energy or high speed rails or our education infrastructure. When you say we are spending 10 billion dollars on something it sounds like a lot of money, but I hate to say this but 10 billion dollars isn't much money at all when you talk about national infrastructure initiatives.
Now the biggest snag in that whole argument is that there is such strong consensus against debt spending now. People like to talk about how Europe has such activist governments, but they are leading the way in controlling debt spending. The problems with some countries nearing default on their debt have caused policy makers in the E.U. to pull in their purse strings. You hear a lot more anti deficit rhetoric in the E.U. than you do here. And as for here you do still hear a lot of talk about another stimulus package, but that is just because the government is running scared, they know they have to do something, and at the popular level there is some very strong sentiment against deficit spending, and not just deficit spending but government spending of all kinds. Point being all this talk of government spending is a non starter. It just isn't going to happen. The American public won't buy it, and the Chinese won't buy it, and they buy a lot of our debt. So that means that whether or not it is a good idea, it just isn't going to happen. Not for the length of time it needs to, and at the level it needs to.
So where does all this leave us? Well if the conservative path won't help us in time, and the liberal path doesn't even have a chance of happening, which let's face it is where we are at, then that just leaves us with ourselves. So it is time that we accepted that we need to take care of ourselves for awhile. Families need to move together to pool their resources, civic projects need to be done on a volunteer basis, local assistance programs like food pantries need to be actively supported, people need to plant gardens. This is what has to happen. Now if we ignore this it will happen anyway because it is simply what has to happen, but if we face the path we must take we can better prepare for it. I would feel much better if I heard these talking heads say, well we need to shrink the government but until we do I am donating a thousand dollars to my local meals on wheels and volunteering at my churches soup kitchen, or we need the government to spend more but until it does I am donating a thousand dollars to the local food pantry and picking up trash at the park this weekend. Instead the message is one of denial and hope in something that just won't happen fast enough to take care of those really in need.
If you want a realistic look at where we are, that is it.