When you get right down to it, everything, and I mean everything, is about the economy. Whether it is immigration in America, warlords in Africa, unrest in Palestine, the Arab Spring, the rise of radicalism in Europe, or the Tea Party in America, it is about the economy. Whether it is religion, political parties, territorial claims, or brutal dictators, these are all means to an end to control cash flow, to be on the favored receiving end. Being strong economically is the only strength. All the others are simply manifestation of your cash flow.
If you want world peace and less strife, then the world has to be improving economically. Now that should make you very nervous because right now things are degrading and that will bring on the rise of more strife and radicalism. If you look at the rise of Hitler, much of his political success was due to austerity that the Allies (France England, and the United States) forced on Germany and Austria after WWI to pay war reparations. Whether in the world of major political events, or minor domestic politics, most of the action is about protecting or improving economic status of one group or another. That is why the choices we make in the next election are so important.
Now in this country we can argue about immigration, climate change and what to do about it, money in politics as free speech…Oops, I just made my point, it is all about the money. Now one thing we can all agree on is that things are not what they should be in our economy. But from there things really diverge and we have three distinct options for a path to take. They Are:
- Continue the status quo with Obama as President and a Republican Congress and our drift continues with the economy staying depressed for years until we have deleveraged, and the economy starts to grow again. Optimistic estimates say this could take 10 years or more. This assumes Europe or China don’t crater (see tomorrow’s blog)
- We can take the Republican Plan which is to slash government, slash taxes, and slash regulation. The assumption here is that regulation and taxes, and the government spending all our money is what is holding back the economy and the private sector from booming (supply is the problem).
- We can take the Progressive approach which is that government has a vital role to play, give aid to states to restore their spending, really do something about the overhang of debt in the private sector, and begin a massive campaign of spending to improve infrastructure and to fill the void of lack of spending by the private sector as they deleverage (demand is the problem).
That is really what this election is all about and nothing else. The choices are stark. All the other issues pale in comparison and will have no real effect on the election except possibly the women’s vote if the Republicans continue their attack on women’s rights. I will discuss the implications of the economic path chosen below, but the real point of this blog is not my arguments (as factual and right as they are) but the fact that this is the central issue of our times and I have yet to see it intelligently discussed in the media. There is plenty of historical precedent including real time events in Europe to evaluate these economic strategies and what we get is more he said/she said and claims instead of real indepth analysis. Isn’t it time our media grew up and did its job? Oh I forgot, “corporate” media has a strong bias in this one and it is not liberal.
Option 1 is where we are today if nothing changes. Obama flails about involved in a blame game (and rightly so), while the Republicans stymie anything that might improve our economy. With that political dynamic, nothing changes and we have to wait until things just improve on there own. The trouble with that path is that a whole generation of young people are lost, the suffering is needless, and most Americans don’t want to wait for “whenever”. Sadly the political reality is that that is exactly what they will vote for in November. When you really get down to it, we have to make a choice between option 2 or option 3 if we want real change.
Option 2 is what the Republicans are offering and it can be summed up very simply as slash government spending, slash government regulation, slash taxes on the wealthy. If you look at the Ryan Plan that is exactly what it does and the amazing thing is that all independent analysis tells you it will make the deficit worse which is their cause célèbre to lower the deficit. In order for any of this to work, you have to believe three things: Government regulation is hindering business; as the wealthy get more money there is flow down; and low taxes = jobs. Sadly this can all be checked empirically and it does not hold water. We have a giant real time test case in Europe on the austerity kick, and their GDPs are crashing and Europe may be entering a double dip recession following these policies.
When you really look at Mitt Romney and what the Republicans are offering as a plan and you know something of our own financial history, remember the Bush years, you wonder how they got past the primaries. The sad answer to that is the failure of President Obama to lay out a plan forward or strongly fight for it, and an American public with a short memory and woefully ignorant of history. You have to ask yourself how the American public can forget the consequences of deregulating the financial markets, the tax cuts that simply created some of the biggest deficits in history, and paltry job growth, and you only have to look at how ineffectual Obama and his team have been to allow the Republicans to resurrect these failed ideas.
Option 3 is basically the Keynesian way forward. It involves an aggressive plan to reinflate state spending to rehire teachers, firemen, policemen and others laid off. That would be followed by a plan to either allow most loans to be refinanced at the super low rates, or making banks share the pain with owners of a principal write down. Finally we would embark on a infrastructure improvement program that had a plan instead of just shovel ready. The whole theory of this approach is based upon the assumption that the problem is demand, the private sector will not create jobs until demand is restored, and the government must do it. If we don’t have jobs, the deficit will just get much worse (see Irving Fisher in 1933 and the debt/deflation spiral).
For someone like me who actually reads, studies financial history, thinks through various policy approaches, options 1 & 2 are not just unacceptable, they are provenly failed policies both in history and in real time. But none of that matters with today’s electorate and media. The electorate will not care about data or arcane historical arguments, but about results which are sadly lacking. The media is not going to challenge these failed ideas because then they would appear “biased” and loose their access to the he said/she said spinners.
In order for option 3 to finally take center stage, somebody on the Democratic side has to present a clear and convincing economic plan. The plan has to show why options 1 & 2 will fail and provide specifics about what they will do. Obama has failed to do this and I am not sure he knows. He and his political team see the game as winning the middle and that means compromise with Republican failed policies, That has left what he has proposed and gotten accomplished watered down and has failed to move the economy, giving the Republicans plenty of ammunition to say those policies don’t work. For Americans who only care about results and not the details, that has left the impression that his policies are bankrupt. Thus their tendency to return to failed old policies instead of failure they are now perceiving.
If we get what I think we will get, which is option 1 because the argument to remove the Republicans from office is not being forcefully made, and then the old Obama emerges, we are screwed and we drift listlessly doing nothing. If he lays out a real change in approach, uses both executive orders, and the bully pulpit non-stop to show how the Republicans are preventing recovery, we could turn this ship around. It would really be nice if he would start that fight now. The only reason this thing is close is because he has failed to show that leadership up until now, always trying to thread the needle with the politically safe play.
There are two other events that will impact this election and our standard of living: China and Europe. I will address this (using some really smart people’s ideas) in my follow-on blog.