On the Contrary

Remember that our conservative friends were totally against the stimulus bill.  Then they loaded it up with tax breaks saying that only creating private sector jobs would do any good.  Now they are saying it failed to create the number of jobs promised.  Apparently all those tax breaks weren’t all that effective.  What was effective were the jobs that were not lost in each of the states, especially teaching jobs due to stimulus money.  So let’s just think this through.  You know, apply logic instead of emotion and ideology.  Remember that except for three Republicans, the rest wanted to do nothing.  “Let them eat cake.”

First of all let’s look at cutting taxes to stimulate the economy.  If we were in a mild recession, this might not be a bad idea.  If people weren’t loosing their jobs, then giving business an incentive to hire or replace equipment might be an effective way to stimulate demand.  But in the current situation, there is no demand because the economy is shrinking* and people are losing their jobs.  Why would I hire someone or replace equipment for demand that does not exist?  In other words, in an extreme recession, why would I take the risk on expansion when there is no one to buy my increasing inventory?  I would venture that if you made the tax rate 0% right now, it would not have any impact except on Wall Street where they bet on derivatives, not create capital for new businesses.

Let’s just take little old me as an example.  When I get a consulting check, I sock 37% away for taxes that I have to pay quarterly.  37% is what I have computed over the years to make sure I don’t owe anything come April.  Now if you reduced my taxes from earnings to zero I would have a nice chunk of change I could spend, and so the theory goes, I would stimulate the economy with this spending.  The trouble with this simple minded conservative thinking is I would not spend it.  Times are tough and I am not sure when the next job is coming so I want as much money stashed away as possible as a pad for the future.  No stimulus there. This is generally what economists will tell will happen with tax cuts in a severe recession, but if the only thing you know how to say is tax cuts, then, well, you prescribe it no matter what.  It’s all you got.

So if demand is shrinking, and tax cuts are not going to stimulate private spending, what you have left is public spending.  Oh how conservatives hate this.  The usual complaint is two parts.  It increases the deficit and government jobs are not real jobs that sustain the economy.  So let’s take one at a time:  It is very true that this spending will raise deficits, but so will tax cuts.  Either way the effect is the same on the deficit and our treasury.  Oh but private jobs are self-sustaining while government jobs are dependent on continued spending.  Well, yes and no.

First of all there are no private jobs to be had and they are shrinking.  So the government has a couple of choices.  It wants to stimulate the economy by giving the economy money that will be spent.  That means you give it to people that will spend it, people on the margins.  That generally means you fund state programs.  That is why the job numbers created are teacher’s jobs that would have probably been cut.  You also fund help for indigent (social programs) and that money is also spent.  Is that stimulative?   Of course it is since those people spend money that fuels private sector jobs.  Without it, many more jobs in the private sector would have gone away just further shrinking the demand and the problem.  Same result is achieved with construction/infrastructure projects.  The benefit of this kind of spending is that not only do you at least keep the economy working, you get something for your money, either in your kid’s education (teachers jobs), or needed infrastructure improvements.

To the question of are these make-work jobs that are dependent on continued government spending, the answer is not really.  The government is trying to maintain the services and infrastructure improvements to stimulate the economy until the tax base can once again support these critical services.  The private sector is moribund.  There is no other option.  Well that’s not quite true.  You can follow the conservatives lead and just let the economy collapse and sooner, or more likely later, things will restore themselves.  The collateral damage is not their concern.

Their concern and bogeyman is the deficit.  Okay it is a concern.  But they don’t bat an eye about billions for Iraq and Afghanistan, they don’t see the defense industry as a government program, and they wouldn’t hesitate to cut education, health care, or whatever to support these giant programs.  I don’t think it means a hill of beans to have the strongest military in the world if our economy is a shambles.  Is the deficit something we should worry about?  Of course, but right now we have to get things moving or the deficit is going to get much worse than what this spending will cause.  Later on we will have the fight with conservatives once again to set reasonable tax rates to pay off the borrowing we need to do today.  It is called shared sacrifice which is totally alien to their mind set.  They are on the wrong side of almost every issue because their ideology has constipated their brains and of course the status quo (those that got rich in the existing climate) pays them not to think.

And yes we need another stimulus, as the first one was too small and not targeted to things that would fuel the economy with spending.  Thank you conservatives for that.  That includes some of those moron conservative Democrats that the press continues to falsely refer to as moderates.  This stimulus package or whatever they want to call it, ought to be more focused, to help those out of work (extending unemployment) and real investments in tomorrow. Forget about bipartisanship because the conservatives will try to keep anything from happening.  They will scare the rabble with the fear of deficits while setting the country up to bankrupt the poor.  Nothing ever changes and you would think sooner or later people would wake up to going nowhere.

*While the economy grew 3.5%, most of that was due to replacement of inventory, reduction of workforce , and longer work hours, while unemployment continued to increase.  Even the Stock Market has figured this out as it fell on the weak outlook.  Things are going to get worse, not better without a new stimulus plan.