At this point it’s pretty clear that even the best private economy can’t yet deliver a home and a flat screen television to everyone. Heaven knows America has tried to the past couple decades. And the effort has resulted in a very serious economic downturn.
The fact is that leveraged spending for non-productive uses ran far ahead of productive investment. Inevitably, there came a point where underlying productive activity couldn’t support the spending overhead: Cash flow couldn’t pay the debt off.
The stop-gap temporary medicines have been applied worldwide like never before. Liquidity has been pumped into the financial system. Interest rates have been ratcheted down dramatically. But indebted consumers, indebted investors and financial intermediaries such as banks humbled by massive shareholder losses, means no one wants much to either borrow or lend. Governments find themselves, at some point, to be just pushing on the proverbial “string.”
Nevertheless, the patient’s temperature is stabilized.
Now is the time to apply a cure. It’s time for fiscal stimulus. It’s not as though there aren’t productive areas of investment that haven’t been identified. The alternative, renewable energy transformation that’s absolutely necessary is well defined. Governments worldwide need to unleash their power in directing taxpayer, and private investment, into these areas.
Taxpayer seed money, accompanied by common sense enabling legislation inviting private investment, will have long term beneficial effects on the global economy. The list of endeavors for investment that would benefit everyone, is lengthy and well understood. The challenge is how quickly can governments devise and implement such fiscal, stimulative, strategies.
Former Labor Secretary Robert Reich has recommended that at least 50% of the taxpayer money injected into the bank system be earmarked for loans. Reich is basically arguing for fiscal stimulus because banks are unwilling to lend into consumer related areas. The problem is that after years of consumerism, America doesn’t really have as many productive industries to lend into. It’s difficult for a bank to identify enough borrowers worth lending to..
This is a problem that government can attack with tax policy and subsidies. The quicker government gets to this job, the quicker the private economy can respond. Beezer believes a motivated, Democratic government, can respond much faster than anticipated.
As for America’s Presidential race, the differences between Obama and McCain are not as great as the campaigns would like everyone to believe. Obama has a middle class tax cut, and McCain basically wants to keep the Bush tax cuts that Obama would roll back.
Who cares. The true issue is jobs and productivity in America. And neither candidate really differs fundamentally here. Working class and middle class Americans are worried that their jobs will soon disappear. And all classes are dissatisfied with America’s loss of manufacturing jobs. That’s it in two nutshells. And the cure, as far as govenment is a player, involves fiscal policy.
The real difficulty in achieving these goals successfully in America is posed by Congress. There’s a reason why Congress is unpopular. It has become dominated by intransigent idealogues. Whoever is President will have to speak directly over Congress to the public because Congress has become dysfunctional.
The lack of leadership in Congress means leadership will continue to reside at the White House. Senate Majority Leader Reid, and House Speaker Pelosi are both weak leaders, unable to rally a majority of their respective bodies to consensus action. Even with strong Democrat majorities, both hold beliefs that are wildly unpopular with the majority of voters. Their hypocritical stand on discovering America’s true wealth of fossil fuels ranks number one in unpopularity. If the economic crisis hadn’t materialized, this issue alone would have sunk Democrats in this election, and Beezer believes it is the primary reason Obama can’t seem to shake McCain no matter how bad the crisis gets.
Fiscal stimulus is needed now.