Sunday, February 8, 2009
The Susan Collins Plutocrats' and Kleptocrats Rescue and Relief Bill of 2009 is wending its way through the Senate with passage expected by Tuesday. Conference committee with the House is already meeting, so it is expected to be approved by the House with only minor tweaks the same day or by Wednesday, then go to the White House for the President's signature with much fanfare, bi-partisan comity, and everybody will pat themselves on the back for a Job Well Done and go on Holiday.
And of course, this bill won't solve the economic crisis. But we're told it is better than nothing, a first step only, and we should get behind it.
More and more citizens are saying, "No."
As I've explained many times, the problem is very simple: the economic crisis is largely the result of the collapse of household spending that is due to households' crushing debt burden, flat or declining household income, job insecurity and/or job loss, and for many people, housing insecurity. Households can't and won't spend on non-essentials under the circumstances even if they have disposable income, which fewer and fewer do.
The first step in fixing this problem is to "rescue" household finances. I have proposed it be done through a substantial direct payment -- a minimum of five figures, six figures would be better -- to every household to be used for specific purposes, including paying down debt, purchasing fuel efficient vehicles, weatherizing and improving energy efficiency of homes, etc. Any amount not spent for these purposes in six months reverts to the government for recommitment.
Macroeconomists insist that paying down household debt doesn't serve any useful -- ie: stimulative -- economic purpose, and they would be right if only small amouts are ever made available to households for that purpose. I'm proposing a large amount be made available per household, enough, hopefully, to clear most if not all debt households currently struggle under. Assuming these households still have income (not an easy assumption in times like these), clearing all or most of their household debt would then free up hundreds or in many cases thousands of dollars a month now spent on debt service to be used to purchase goods and services that these households cannot purchase now due to their debt burden and other matters.
If individual household spending increases by hundreds or thousands of dollars per month quickly, the overall benefit to the economy would be massive and immediate. The plunge we're experiencing right now would halt and quite possibly would begin to reverse. Relieving household debt starts the process of recovery. It isn't the recovery itself, nor is it the entirety of what needs to be done.
The objection that increasing household spending power quickly is inflationary has some merit. Last year, for example, households received varying amounts of stimulus payments, from $300 to $2000 or so, and during the period these payments were being distributed, commodity prices, food prices, and particularly gasoline prices went up by substantial amounts. For many people, these higher prices for food and fuel, generally considered necessities, consumed the entire stimulus payment and then some. Yet despite those facts, economists insist that most people actually used their stimulus amount to pay down debt or squirreled it away in savings. Maybe when those checks came, that's what they did with them, but they were spending an equivalent amount or more to cover the higher costs of food and fuel. In other words, inflation was eating up all the stimulus payments and more.
And there is certainly a risk that providing much larger additional payments to households will be even more inflationary.
But we're in a deflationary spiral right now, and from a Keynesian point of view, that's much worse, both short term and long term. Inflation can often be controlled. Deflation is another matter.
Ironically, deflation has not reached the household level, where many prices for goods and services are still rising. Yet household income is declining, and household spending has collapsed.
Susan Collins' Plutocrat and Kleptocrat rescue bill will cut taxes for people on top of the economic pyramid (again!) but will do almost nothing for the masses in the short term, and it will provide only the potential for improving the lot of the masses in the long term through reemployment on some of the infrastructure projects that will be funded, or through derivative reemployment. What it ensures is that certain reliably Republican sectors of the economy (ie: the rich, big business, heavy construction, nuclear power, coal, etc.) receive substantial tax cuts, contracts and subsidies in both the short and the long term, while the People are allowed to Hope things will get better for them... eventually.
The most economically disastrous features of Mrs. Collins scrub bill are the removal or sharp reduction of funding for education and supplementing budgets of states and localities, which, if not corrected immediately, will cause additional millions to be thrown out of work and cause many educational, social service and medical programs operated at the state and local levels to shut down.
I assume Mrs. Collins knows these are the immediate disastrous consequences of the removal or reduction of state and local educational and budget supplement funding, and I assume those are the consequences Mrs. Collins wants. But lets not just blame Mrs. Collins. The White House had a hand in this revision, too, and it is said that Rahm Emanuel, Chief of Staff to the President, personally rewrote the bill to remove or substantially reduce state and local budget supplement funding. Thanks Mr. President!
That being so, the bill that will emerge next week, hailed as a Bi-Partisan Rescue and Recovery bill, will actually be an economic restructuring plan, a Shock Doctrine project, intended to shift as much wealth as possible as quickly as possible from the masses to the Plutocrats and the Kleptocrats while doing as little as possible to relieve the suffering of the masses, and in many cases actually deliberately increasing that suffering on the theory that doing so will make them even more domesticated and compliant.
When people realize what's really going on here, the anger that is seething under the surface may well explode. Our rulers believe that there is nothing the People will ever do, nothing they can do, to overcome the Powers That Be, and so far, they've had no reason to think otherwise. But as the economic pressure grows on the masses, the ruling class could be in for a real surprise.
What's so very disheartening about all of this is that the Obama administration and the President himself, have so badly bungled leadership, and they have shown themselves to be fully and completely in the tank for the interests of Plutocrats and Kleptocrats. To some people, that's not a surprise. To many others, it's devastating.
This is not the Change we can believe in.