Former assistant Treasury secretary Paul Craig Roberts rightly argues that new federal stimulus financed by deficit spending and spent in the “throw money out the window” manner can’t revive the economy because there are no jobs to call workers back to: The jobs have been outsourced to China, India, and elsewhere via the so-called “free trade” agreements. (“Economists Haven’t Got a Clue: Death By Globalism,” September 1, 2010, http://www.counterpunch.org/). However, Roberts’ prescription is to cut the military budget to bring down the deficit. However, any form of austerity, including military budget cuts, would have the anti-Keynesian effect of depressing the economy further. We need more federal stimulus; the problem with the first attempt is that it was too small. (Martin Wolf, “Obama was too cautious in fearful times,” Financial Times, September 1, 2010; see further, e.g., Mark Weisbrot, “Why Fiscal Tightening Will Hurt Spain’s Economy: Drawing the Wrong Lessons From Germany’s Recovery,” September 1, 2010, http://www.counterpunch.org/weisbrot09012010.html; Mike Whitney, “Land of Squandered Opportunity: An Avoidable Depression,” August 5, 2010, http://www.counterpunch.org/whitney08052010.html).
Of course, the military budget – and US military adventurism around the world – should be cut very substantially for reasons of policy and morality. So the solution is in substantial federal stimulus, to pump up aggregate demand, but financed by a combination of military budget cuts and deficit spending. The proceeds, if targeted to permanent job creation in energy conservation (e.g., weatherization of homes and businesses and other forms of increased efficiency), truly green energy production, mass transit, agriculture, and other fields – not “infrastructure” to preserve the dying auto-based economy – can grow the economy on a sustainable basis.
Thus far, only a fraction of the money thrown at economic recovery has been allocated to the “real” economy where many of the workers who still have jobs are struggling just to keep food on the table. Substantially more is needed in the short-term. But looking ahead, we should keep in mind that the economy that was operating prior to the onset of the financial crisis was unsustainable and cannot be revived, in part because it was based on over-consumption financed by excessive and continuingly increasing leverage (debt). An economy running on ever-increasing debt is one huge Ponzi scheme, and that’s what Treasury and the Fed are still trying to revive.
Instead, we should reexamine the various so-called “free trade” agreements to redress the damage Paul Craig Roberts describes and ensure that the effort to rebuild our economy is not undermined by the continued off shoring and outsourcing of jobs. These agreements include the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA), and the World Trade Organization (WTO).
The Trade Reform, Accountability, Development and Employment (TRADE) Act (http://citizenstrade.org/orftc-tradeact.php) would address the provisions of these agreements that undermine our economy by rewriting the rules governing international trade to make it a positive force for working people in the U.S. and around the world. The TRADE Act is now cosponsored by more than half the Democratic Members of Congress. While details may still change, in broad terms, the TRADE Act would establish mandatory standards for future trade agreements regarding labor, the environment, consumer safety, trade in services, public procurement, agriculture, intellectual property, and other concerns; require the review and renegotiation of existing trade pacts, such as NAFTA, CAFTA and the WTO, so that they meet the new standards; and reassert congressional authority and public oversight in the trade policymaking process.
Even more immediately, we need repaired and improved infrastructure, with the emphasis on energy conservation, mass transit and renewable sources, education to prepare workers for the jobs of the future, and a universal healthcare system to enable U.S. firms to be viable and compete. Investing almost entirely in mass transit rather than automobile-related infrastructure could be a critical part of the solution. We should rebuild our rail system for the shipment of goods as well as alternative transportation. Restoration of train service in the vicinity of major cities would alone greatly decrease the need for air transit of a few hundred miles, which is comparatively inefficient and wasteful of scarce resources. The initial federal stimulus continued to reflect a belief that resources are unlimited, all but ignoring the need for a new efficiency. As James Howard Kunstler observes (http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/04/note-hope-truth.html):
“One very plain and straightforward example at hand is the announcement … of a plan to build a high-speed rail network. To be blunt about it, this is perfectly … stupid. It will require a whole new track network, because high speed trains can’t run on the old rights of way with their less forgiving curve ratios and grades. We would be so much better off simply fixing up and reactivating the normal-speed track system that is sitting out there rusting in the rain—and save our more grandiose visions for a later time.
“… With the airlines in a business death spiral, and mass motoring doomed, we need a national passenger rail system desperately. But we already have one that used to be the envy of the world before we abandoned it. And we don’t have either the time or the resources to build a new parallel network.”
We also have the opportunity to re-tool old factories for the production of products used in the new green industries. U.S. Senator Sherrod Brown has sponsored a bill that begins to address this need. We should explore the regionalization of manufacturing to reduce shipping costs and provide jobs throughout the country, providing opportunities in states where manufacturing has not previously been a major economic activity.
There is considerable public support for such measures. A bipartisan poll recently conducted by Mark Mellman and Whit Ayres shows U.S. voters are unified in their concern over the loss of manufacturing jobs. In a poll of 1,000 likely general election voters, “We have lost too many manufacturing jobs” is the top concern among independents and working class voters, even compared to government debt, loss of life in Iraq and Afghanistan, the high cost of health care, illegal immigration or terrorism. Eighty-seven percent favor having a “national manufacturing strategy,” 77 percent say that “jobs being shipped overseas” is among the issues they worry about most or worry about a great deal, and 92 percent have a somewhat or very favorable impression of goods made in America. Other highlights from the poll are that 86 percent of voters want Washington to focus on manufacturing, and 63 percent feel working people who make things are being forgotten while Wall Street and banks get bailouts. Two-thirds of voters believe manufacturing is central to our economic strength, and 57 percent believe manufacturing is even more central to our economic strength than high-tech, knowledge or financial service sectors. The poll shows overlap among Tea Party supporters, independents, non-union households and union households on these issues. And it found all that without even offering the more fundamental choices, such as withdrawal from NAFTA, for which voter support has been growing for some time.
Margaret Kimberley (http://www.counterpunch.org/kimberley02042009.html) makes some additional useful suggestions, such as true healthcare reform (which would relieve considerable stress on existing businesses) and drastic cuts in wasteful as well as dangerous military spending (see further below). Apart from the horrendous impact on millions of people, the lack of universal healthcare places U.S.-based businesses at a competitive disadvantage to their counterparts in other industrialized countries, all of which have such programs. More generally, the social safety nets in other countries – unemployment benefits, welfare systems, and pension systems – are more generous, and these not only benefit their people as individuals and families but also strengthen their economies as a whole. (Jeremy Gantz, “America, The Is A Better Way: It’s Called Germany,” July 23, 2010, http://www.alternet.org/authors/11782/).
There is yet an additional dimension to the difficulty of economic reconstruction for long-term prosperity and sustainability. When we recovered from past recessions, we had abundant natural resources. With cheap oil now substantially gone and the Old Economy threatening the biosphere itself (breathable air, drinkable water, arable land), it’s both futile and unwise to attempt a “jump start.” We need an economy restructured as if people and the Earth matter, not billions to build or rebuild highways and tax breaks to buy cars and trucks nobody wants anymore. James Howard Kunstler again:
“The truth is that we’re comprehensively bankrupt, and no amount of shuffling certificates around will avail to alter that. The bad debt has to be ‘worked out’–i.e. written off, subjected to liquidation of remaining assets and collateral, reorganized under the bankruptcy statutes, and put behind us. We have to work very hard to reconfigure the physical arrangement of life in the USA, moving away from the losses of our suburbs, reactivating our towns, downscaling our biggest cities, re-scaling our farms and food production, switching out our Happy Motoring system for public transit and walkable neighborhoods, rebuilding local networks of commerce, and figuring out a way to make a few things of value again. What’s happened instead is … that our politicians [are mounting] a massive campaign to sustain the unsustainable. That’s what all the TARP and TARF and PPIP and bailouts are about. It will all amount to an exercise in futility and could easily end up wrecking the USA in every sense of the term. If Mr. Obama doesn’t get with a better program, then we are going to face a Long Emergency (http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/04/note-hope-truth.html) as grueling as the French Revolution.”
The creation of more jobs at higher wages will require a complex process of reconstructing an economy as if people and the Earth mattered. We need something – indeed many things – to be substantially different, including, for example, the means of producing food by sustainable agricultural practices. We need very substantial changes to the system of food production, with less chemically dependent agribusiness and much more locally based, smaller-scale and sustainable farming. Given the myriad difficulties of the present moment, the new agriculture envisioned by Wes Jackson in Robert Jensen’s excellent interview in CounterPunch (http://www.counterpunch.org/jenssen01302009.html) and the 50-year plan to create it are eminently realistic, and would be one good way to start. We need not only new and better ways of farming but more people on farms, and if there isn’t the money to pay them but there are people starving for lack of work, that’s a flaw in the economy that can be fixed by human action.
Most immediately, more funds should be allocated to facilitate economic recovery. And the first priority should be further financial assistance to the States. What Robert Reich pointed out in his blog post (http://robertreich.blogspot.com/2009_04_01_archive.html) on 4/09/09 entitled “Why It Makes No Sense for States to Cut Services and Raise Taxes Now” turned out to be right on the money: huge state and local budget cuts have essentially negated almost half of the federal stimulus.”
Late reports indicate Obama is conferring with his advisors to devise a few more tax cuts that would reward job creation. If only they had had this crew on the Titanic; those deck chairs needed rearranging just before they sank! Give me a break – or lots of Democrats are in for a long vacation. Obama should demand another stimulus, including enough to help the states maintain vital services and avoid tax increases, and Congress should heed the request. Ths current political environment makes this difficult, and the GOP will do everything possible to prevent it and/or paint it in a bad light. Mike Whitney, “The GOP’s Midterm Strategy: Make Sure Obama Fails,” http://www.counterpunch.org/whitney08272010.html. But the political environment also demands that the Obama and the Democrats do something drastic, and they may as well, for once, do the right thing. Edward Luce, “Obama’s Democrats face midterm election meltdown at every level, according to polls,” Financial Times, 9/1/10, p. 1.
Another step that could be implemented relatively quickly would be the cessation of our foreign military adventures deceptively advertised as the “war on terror,” under whatever new marketing terms, now shifting from Iraq to Afghanistan and Pakistan. The so-called “war on terror” has been an enormous waste of resources as well as human lives, in that a substantial consensus among knowledgeable analysts finds – as was predicted – that the result has been not a decline, but an increase in terrorism. At the same time – and apart from the appalling and immoral loss of human life – an increasingly glaring fact about these wars is that we just can’t afford them anymore. We’re waging them on credit, and increasingly on credit from foreigners. And the resources wasted on these destructive activities are wholly unproductive from an economic standpoint (http://www.counterpunch.org/wheeler01272009.html), as well as needed elsewhere.
More deficit spending of the “throw money out the window” variety would probably not even achieve much for the reasons Roberts cites, and would at least ultimately make matters worse, while fiscal austerity by any means, including by cutting military spending without compensating action to replace the demand that spending now represents, will pretty much insure the Even Greater Depression of which Mike Whitney has written so well and so many times of late, most recently at http://www.counterpunch.org/whitney08312010.html (“The Recovery Is Dead: The Backward Slide Into Recession,” 8/31/10). A carefully targeted and structured federal stimulus program would take considerable finesse to pull off, but would offer hope of a real recovery and a better future.