Tuesday, April 5, 2011

slash and burn economics

The problem with “the spending problem”

It really is quite the slogan. Catchy. Conservatives of all types have been trotting it out for the last year.

The trouble is that it is completely false.

I’ve written about the way we ought to look at our budget here, but I'll try another way.

The Simple View
The budget is composed of income and expense. The current conservative argument is to deal only with expenses and not touch income. This, of course, is ideologically-driven, based on the pre-existing desire to cut expenses.

However, since the recession, BOTH income and expenses have been effected. Half of the reason there is a significant deficit in the budget is do to a dramatic loss of revenue. To try to make up the difference while only dealing with expenses would be to cut twice as much. And the only way to do that is to decimate just about everything and cause further stagnation. Haven't businesses been complaining about unsettled conditions?

The Complex View
Where we all get mixed up is that our national income isn’t just taxes: it’s also investments and a variety of other income streams. This means, Wall Street. Democrats have been reluctant to punish the creators of the recession (Hint: they are named in the previous sentence), not because of campaign donations (since many more go to Republicans from there) but because Wall Street needs to perform to help raise the income. When Wall Street isn’t happy, as we saw last summer, they can stagnate the economic recovery all by themselves.

This is also where unemployment enters in. This goes well beyond the “more employment = more spending” equation. High levels of employment generate all sorts of revenue for the country. Anyone paying attention to the stimulus plan should understand this equation: every dollar spent on direct job-creating stimulus more than doubles the cash—you spend a dollar to create a new job, you actually create $2.17. If you spend a dollar to cut taxes, you walk away with less than $1.50. Dealing with unemployment is a fiscally responsible (and dare I say conservative?) approach to the economic crisis.

Fixing the budget “crisis”
The budget can actually be fixed by generating more income, not just cutting. Growth in jobs, particularly stable, public sector jobs and investments in innovative industries (you know, the kind that are growing and not shrinking) such as high-tech, renewable energy, and mass transportation (high-speed rail) create scores of money directly into the economy. They also bring growth to industries that will drive Wall Street, further growing the economy. I’ll even let them make a few cuts—take a look at the bloated defense budget...

If you want a better image for the conservative plan at the moment, think of slash and burn farming of the rain forest: it devastates the old-growth forests, it depletes the usefulness of the soil in just a couple of years, and increases smog and carbon dioxide. This level of destruction is unsustainable, and yields next-to-no benefit, while causing irrevocable harm to a fragile ecosystem. That’s the current conservative platform: massive destruction for low-yield gains. So here’s your bumper sticker.

Republicans: support the slash and burn economy.