By John Lawrence and Frank Thomas/ Will Blog For Food / June 6, 2011
Obama seems to be counting on the fact that the economy will recover on its own after the initial stimulus package. It’s starting to look like this was a bad bet. The Republicans of course have their job creation plan in place: lower taxes especially on the rich, less government spending and more deregulation or, in other words, the continuation of the transfer of wealth from the poor and middle class to the rich. However, this is precisely what has ruined the economy.
As Robert Reich, Bernie Sanders, Paul Krugman and others have been saying repeatedly, the government has to spend more to create jobs and raise the money to do so by a variety of mechanisms like a financial transaction tax, doing away with subsidies for oil and agriculture, closing tax loopholes for corporations, raising taxes on millionaires and billionaires etc.
Obama is in the weak position of not having an ideological counter to the Republican ideology. The Democrats need to develop an ideological position based on Keynesian economics to counter the Republicans. Obama’s “Republican lite” philosophy will probably result in his losing the next election if the economy continues to sputter and stagnate. His position seems to be the Republican position only not quite as severe. What is needed is a complete repudiation of trickle down economics, union busting, the “small government” mantra, and the wealthy as “job creators.” The Democrats need an ideological consistency to counter the Republicans who are extremely ideologically consistent.
Most of the jobs being created are temp jobs and lousy jobs at less than a living wage. The Democrats are not addressing this and they need to. The Democrats need to state loudly and clearly that the government needs to be the job creator of last resort. If private enterprise cannot create the jobs to provide for a full employment economy, then government must step in and fund infrastructure repair projects and even a WPA style work program. We need to get over the notion that the only legitimate government job creation program is in the military.
Obama’s Administration and the Republicans are either brain mute or unwilling (out of fear of increasing America’s indebtedness now with CONSTRUCTIVE PUBLIC DEBT financed investments ) to recognize the deeply structural character of our nation’s declining rate of job generation shown in Frank’s 30 year trend summary (The U.S. Ongoing Structural Unemployment Calamity ).
For the remainder of this article and its graphs, go here.
{ 9 comments… read them below or add one }
Keynesian economics has failed!
I don’t know of any time in financial history were more government money has been injected into an economy than during the last two years. Artificially low interest rates, lowering the value of the dollar, TRAP bank bailouts, the government buying private corporations and the stock of GM and AIG, stimulus spending, cash for clunkers, first time home programs, QE1 and QE2, and exploding national debt, has yielded 1.5% GDP growth and 9.1% official unemployment (about 15% real unemployment).
Both Kennedy and Reagan successfully stimulated the US economy with tax cuts and reduction in government regulation.
RB – Think WWII and before that the government’s response to the Great Depression. Later Reagan was responsible for tax raises.
I did think of this period, when government programs were measure in billions rather than trillions. And on a percentage term of government size and length of almost ten years there is no doubt this was the mother of all Keynesian spending. But spending $4 trillion in just over two years (more money in less time), this is the mother of all Keynesian failures. Also, the current theory is the WWII ended the anemic economy of the thirties.
For me, a much better argument for our current Keynesian failure is not the amount of spending but how we spent the money. FDR directed the money at the poor and needy and at projects for the social good like damns, roads and infrastructure. Reich, Krugman, Romer and Obama bailed out the banks and campaign contributors.
WRONG!!! It’s supply side economics that has failed us miserably. It’s the Keynesian model that is keeping this country afloat.
And by the way: It was Keynesian economics that encouraged the investment to bolster the American auto industry, which was ridiculed by Republicans who wanted to see Chrysler, GM, and Ford go bankrupt, effectively killing the US auto industry altogether (and with it our entire manufacturing base). I guess in hindsight you’re still saying it was a bad idea, given the level of profitability achieved just a few short years after rock bottom, and with GM and Chrysler paying back almost all of their loan money to the Fed. Guess what: The Treasury actually made a PROFIT for US taxpayers on those “bailout” loans to GM and Chrysler (Ford only requested a line of credit should they need it……they were on solid enough financial footing as to not actually need a loan, and thus never took any money from the Fed).
Time for you and your Repub buddies to pull your heads out of the sand.
The taxpayers provided $13 billion to Chrysler in the bailout.
$4-5 billion will never be paid back and was lost in bankruptcy.
$3-4 billion in new funds were RECENTLY given by DOE to Chrysler for a ‘green grant’.
Chrysler uses this new DOE money and $3-4 billion form the Fiat parent to ‘pay back’ the bailout. So 30% of the bailout money is lost forever and half of the money returned in the payout comes from DOE……AND WE MADE A PROFIT?
Now let’s look at GM and the false… paying it all back claim.
For year GM made little on selling its cars. GM made its money on financing cars through GMAC. GMAC was a part of GM just like Chevy was a part of GM.
During the bailout and independent of the auto unit, GMAC received funds from the government that will never be paid back.
GMAC received $5B from TRAP in Dec 2008.
GMAC received $7.5B from the Treasury in May 2009.
GMAC received $3.8B again in Dec 2009.
GMAC reeived a total of $16.3B from the government as a part of the GM takeover by the government.
GMAC is now hidden under the name Ally Bank.
This money has not been paid back and was part of the GM bailout…….AND WE MADE A PROFIT?
The tax cuts that were proposed by Kennedy, and passed by Congress the year after he was assassinated, reduced the tax rate on the highest income bracket from 91 percent of income to 70 percent. The current highest tax rate is something like 35 percent, so it would have to be approximately doubled to get to the same rate that existed after Kennedy’s tax cut took effect. So is it the Kennedy tax rates that you think stimulated the economy, or just the general idea of cutting taxes, no matter what the rates were before and after the cuts?
I believe the President needs to signal that he is ready to work with business.
The rate is not the big issue this time. I would allow corporations to bring back profits held overseas without tax. I would follow the Germany model and not tax profits made on exports ( you would still tax profits made in the U.S.). This would create jobs in the U.S. for goods to be sold overseas. This would reduce unemployment and income and payroll tax revenues from the new employees producing goods here would increase dramatically. Employees with new jobs would win, companies would win with reduced taxes on exports, and the Federal government would win with reduce unemployment costs and increased payroll and income taxes from the new workers.
No being versed in financial matters, I’m gonna give this one a shot. The reason the econ sucks,is, the wrong people(remember corps are peeps) got the money. If they(meaning us.U.S.) would have given the $ to regular folks we would have spent it. Remember it’s our money in the first place.