Waiting for things to pick up

I suppose one upside of the debt ceiling fiasco is that more Americans have become aware of the fine-grained details of the federal budget. It is oddly telling, however, in this day of PowerPoint and desktop publishing, that the President, when repetitively addressing the nation about the dangers of not raising the debt ceiling, never once uses any form of visual aid or chart. Thus, our leaders want us to be aware that there is a problem but not to the point of being fully informed about how bad it is. Being fully informed can lead to unwanted reactions, such as totally freaking out.

There appear to be two forms of denial in operation these days, as the good ol' U.S. of A. comes to terms with its new, penurious reality. One approach, favored by liberal economists such as Paul Krugman, Brad DeLong of Berkeley and Dean Baker, is to assign most of the current problems to the financial shock delivered by the fall of one medium-sized investment bank in late 2008, Lehman Brothers. This approach has the merit of allowing such wishful thinkers to use a straight edge to graph a GDP-growth trend line from 2003 through 2007 - and then to extend such a line into 2011. Under this approach, the liberal economists can then laugh and snicker at the feckless policy makers who fail to see that federal spending, always in some vague, unspecified amount, would restore the nation quickly to such hypothesized trend line, and voila! the bad times would be over. Krugman often laments that the failure of the government to take his advice has "gratuituously" consigned America to economic recession. I really think that Krugman's ego should be designated a National Monument, if indeed not a National Park.

The other approach, now taken by the Sturmabteilung wing of the Republican Party (the Tea Bag contingent), is to believe that America's greatness can be restored simply by identifying federal government "waste," such as the Department of Education and the EPA, eliminate it, and America will then gain "confidence," and small businesses, freed from the yoke of intolerable "regulation," will go on a hiring binge which will fill the nation's coffers with overflowing tax dollars.

These are the competing fantasies of our political leaders. The sad truth is that the early years of the Aughts decade (2000-2007) were an illusion and an aberration. Taking office with a small surplus bequeathed to the Republicans by Bill Clinton, George W. Bush and Tom DeLay pushed relentlessly to lower the top marginal tax rate while simultaneously massively increasing military spending, both as a Pentagon baseline and for the "supplemental" costs of fighting wars in Afghanistan and Iraq, neither of which was remotely necessary for the nation's safety or defense. Because, however, the housing bubble was in its most robust expansionary phase, the tax revenues (resulting from all that consumer activity made possible with borrowed money) kept fairly close pace with the federal budget, although Bush, as with all Presidents since Reagan, cheated by subtracting the money stolen from the Social Security fund from the true yearly deficits. Measured as the growth of the national debt, Bush ran deficits of about $500 billion per year, even in the midst of the housing boom and with total tax revenues nearing $2.7 trillion, or at least half a trillion more than today, four years later.

What the lib econ guys miss, such as Dean Baker, is that the boom times cannot be extrapolated forward to the present. (I don't know how they miss it, but they do.) They're gone. However, thanks to the mania for compromise which characterizes our current Chief Executive, the tax reductions, which would have expired on December 31, 2010, remain with us (along with a poorly conceived reduction in the Social Security tax). Further, Barack decided to be Just Like George on the war front as well, expanding the war in Afghanistan and starting brand new ones in Yemen, Libya and Somalia while making no reductions whatsoever in the Pentagon baseline budget.

We thus have a Triple Witching Hour placing enormous pressure on the federal budget: an aging work force trying to retire, but with too few active workers to support their Social Security payments; an inadequate tax base with marginal tax rates too low and unemployment too high, but with a plutocracy in control which will not allow any increase; and an obsolete "consumerist" economy, hollowed-out by offshoring and ruinous free trade agreements, with no housing equity to keep the buying bonanza in motion.

Despite the above, indisputable realities, the country keeps trying to spend about $1 trillion per year on defense and homeland security in its maintenance of an international empire. Every day we unleash more Predator missiles to defend ourselves against Muslim insurgents, terrorists and surprised members of wedding parties, all of them in countries thousands of miles from the United States but in some undisclosed fashion posing an imminent threat to our safety. (We're unclear whether we "almost never" kill innocent civilians, as John Brennan, the National Something-or-Other claims, or we kill about 14 civilians for every "terrorist" we take out, as a just completed British study contends. One or the other; doesn't matter, as long as we're winning.)

We will certainly raise the debt ceiling. The Republicans are simply looking for a way to do so while fooling their cadres of overweight, white, religified government dependents that they're not doing precisely that. Remembering that the government runs a deficit of about 12% of our entire GDP, and that GDP is calculated by adding C+I+G+(Ex-Im), where C is consumer spending, I is certain types of capital investment, G is government spending and Ex-Im is the net of exports over imports (this one's always negative here in Walmartland), one can deduce that if the government suddenly loses 42% of its "funding" (borrowing) equal to about 12% of GDP, the gross domestic product is going to take a massive hit. Those in power from either party will not want to preside over that, because telling the Tea Baggers, "This is what you wanted," will not do the solons any good while the tar pots are being fired up.

It will be good when the fiasco is behind us, simply because it's too demoralizing to think about and hear about all the time. We will then go back into Godot Mode, as in Waiting For. Waiting for the economy to recover, for jobs to appear, for seniors to unretire, for the sick on Medicare to get well, and for candy-shitting unicorns to reproduce at a prodigious rate. This has been the "strategy," one way or the other, for about five years, from that occasion when W told us, in his one moment of felicitous description, that "this sucker could go down." He might very well have been right.