commissioner.org
| Source | Jim Devine |
| Date | 08/12/14/19:38 |
| Sandwichman wrote:
> At a moment when the entire spectrum of bourgeois stupidity and cowardice is breathlessly [??] embracing the magical "stimulus package" nostrum, one might imagine that a "left" would be eager to develop a critique of the prevailing idiocy. Instead, many of those [unnamed individuals] who style themselves "on the left" reveal their thinking to be simply the left flank of bourgeois stupidity.< SO, TOM, WHAT'S wrong with the "stimulus package" _per se_? Let's examine it (remembering, of course, that at this point, it's fictional). * It involves Keynesian fiscal stimulus of the demand side in a time when monetary policy has largely lost its power. Even without the supply-side stimulus, it creates jobs and income via the multiplier effect. * If a major part of the program goes to "revenue sharing" with state & local governments, it will prevent the current cut-backs in social services, education, etc. from happening or even reverse the trend. * This demand-side stimulus will increase the markets faced by business, encouraging them to do fixed investment (the accelerator effect), which would have a further multiplier effect. In theory, this fiscal expansion would also "crowd out" business investment by raising interest rates. But if the US economy is indeed falling into some sort of depression, this is precisely the time when what's more important to business is the size of the markets where they sell stuff, not the cost of finance. * If done right, it helps the "supply side" of the capitalist economy, too: fixing old infrastructure that's decayed over the years (due to neglect) and adding new infrastructure (and education and basic research, etc.) help raise the ability of the capitalist economy to produce in a few years. This is quite different from the wasteful spending (Iraq, etc.) that has characterized the last 8 years. (If Obama and his economic advisers are smart (and their fans say they are), this kind of spending will be done using a "capital budget" rather than from a merged budget, where unlike the current budget, the capital budget does not have to be balanced (cf. Robert Eisner's work).) * If done right (as described by Obama's followers), this kind of investment program would reduce the US economy's negative environmental impact. * Any accelerator-driven fixed investment would also promote the supply side. I don't see why this is "stupid," but obviously there are problems: * It increases the US government's debt, adding on to the obligations that Dubya accumulated. But if done right, it would also raise the ability of the US economy to produce and thus the US government's ability to handle the debt using tax revenues (without raising tax rates). In any event, the increased government would correspond to increased government assets, no? Unlike consumers, firms, or state & local governments, the US government is not going to go bankrupt in the near future (at least not during the next 20 years). * Much of the demand-side stimulus in the US would "leak out" to buy imports. But the _world_ economy needs stimulus, doesn't it? Even China is having problems. Also, a lot of countries outside the US are also investing in infrastructure, etc., which would "leak out" from their economies, some of it to buy US products. So it's possible that a world-wide recovery could happen. * In theory, fiscal deficits cause higher interest rates, which would raise the dollar exchange rate. Given the low interest rates that monetary policy has imposed, this might be a good thing. Absent the "safe haven" effect, the US dollar would have fallen drastically in recent months. * A lot -- even 90% or 99%? -- of the infrastructural investment might be "pork barrel" spending, helping the districts of influential congresscritters and businesspeople but not helping long-term supply growth. But if we're in a severe depression, maybe even building pyramids is appropriate (as Keynes suggested) because it's the demand-side stimulus that's most important. * However, building pyramids and the like (cf. Memphis, TN) might lead to increased pollution, just as with normal growth of real GDP. The "green" content of the program has to be emphasized. * The program saves capitalism, not humanity. It's not going to produce socialism, to the utter disappointment of the maximalists. In fact, without political pressure to counteract the prevailing winds, it might not even have very equitable results. The steady rise in inequality since the late 1970s in the US might stop, but it might not be reversed. It's quite unlikely that the US will see any kind of social democracy in the near future. * It does not reduce individual hours of work per year. But in the current situation, I'd guess that many people would rather work _more_ hours, especially since there's no guarantee that higher pay per hour will compensate for the reduction of hours. Faced with their severe debts accumulated over recent decades, a lot would be interested in more hours of work simply to reduce their debt loads. The program does not seem to promise to end the US slide toward mass debt peonage. I'm sure that there are other flaws in the Obama program (especially in practice) and I'd like to hear about them. |
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