Friday, January 30, 2009

The Economic Crisis and the Hypocrites

Listening to the Republicans attacking Barack Obama for trying to save the U.S. economy from the disaster that George W. Bush and his followers brought upon us is a bit much. Hypocrisy!

While it is true that the U.S. is running a huge deficit, and that it will grow considerably over the next few years, the key thing is not the number per se (within reason), but what we do with the money we borrow from the future. It’s a tremendous irony that the conservatives are now screaming about deficits and government spending, something they didn’t do when George W. Bush turned the surplus he had inherited from Bill Clinton into an ever growing deficit with his tax cuts for the rich and disastrous invasion of Iraq. It’s only when the U.S. government is going to do some real investments in the future and help the middle class and working that they go bananas.

Nobody is proposing to substitute the capitalist market economy with a centrally planned socialist economy, but when you are in a deep recession on the verge of a depression, you can’t follow the old playbook by having the Fed fiddling with the interest rate.

It sounds like many conservatives would rather do nothing, but this is not an option today, unless you are willing to allow for mass poverty, starvation and possibly a civil war down the line. John Maynard Keynes wrote the book so to say on how to prevent the capitalist economic system from self-destruction, and it’s thanks to him and clever can-do politicians like FDR that the U.S. and world’s major capitalist economies has system stabilizers, which prevents it from collapsing totally.

Conservatives hates government intervention, unless it is for Hot Wars like the invasion of Iraq, or Cold Wars like the SDI program, which is why we didn’t hear them protest much against either Ronald Reagan’s reckless defense build-up or Bush feckless war in Iraq.

What Keynes showed and FDR did was that it is better for the government to spend than sit idle, while the economy settles on an unnecessary low capacity utilization. When the private sector has lost hope, and consumers are terrified, there is no incentive to invest and build the future. But the government can take a longer view, and if it uses its resources and the money it borrows wisely, it can put idle resources (which you have to feed and shelter anyhow unless you want to gamble with a revolution) to work and give the entire economy a jolt and steer it out of the ditch.

In today’s world and in the U.S., there are tremendous unmet needs as far as services to the public goes, for investments in the crumbling infrastructure, and in jump starting the green economy that is the one and only future for the world. We are facing a structural shift, and market forces typically cannot respond to such major changes as we lack accurate pricing signals for a transition from one economic structure (based on the old, carbon-based Earth destroying energy) to another (based on renewable Earth friendly energy). If you invest wisely, and governments can do that even if they don’t always do it, you can get the economy back on track, a new track, and once the engines are humming again, we can make a plan for paying back our loans.

Of course we would much rather have done this investment in a better future when we had the money and a surplus, but don’t have that luxury thanks to eight years of George W. Bush and his republican boosters.

Give Barack Obama a break. He’s on the right track, and he’s an honest man who cares for you and me.

Hans Sandberg

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