And if six months ago, I'd have suggested raising the question of widespread economic crisis requiring nationalisation of a vast chunk of the US financial system, your answer would have been ditto on above, I'd guess. At what point can you, as a Marxist, proudly fly a red banner and not that limp capitalist-revival flag, when I suspect you also believe Keynesianism can't work?
> You may have noticed that there's no political movement pushing for
> anything beyond a large stimulus program. You may call that
> "garden-variety Keynesian," but when was the last time you saw a
> spending package that's very likely to be adopted approaching $1
> trillion? When we're facing a possible economic meltdown, you have to
> defend aggressive fiscal and monetary policies against right-wing
> critiques. Did you see the questions I was told to address, and the
> political affiliations of my interlocutor? I don't set the terms of
> debate - that's hegemony for you.
So go back to that jerk's writings, like Radicals for Capitalism, and find some quote about deregulating Wall Street, delegitimise him, and end the damn hegemony. You treated him with kid gloves, Doug.
> Still, all this state intervention is changing the political terrain.
> Note that the Republic Doors & Windows workers used the aid to BoA as
> part of their argument. We're going to see more of it this in the future.
But will that firm be popped right back into the circuits of declining US capital (i.e., quick-souring lemon socialism), or can its own bailout be used for proto-socialist purposes?
> Re: Japan. We should be so lucky. After a speculative mania of world
> historic proportions led to a bust of equally impressive magnitude,
> Japan suffered not a depression, but a decade of stagnation.
That's my point. They didn't do the devalorisation of productive capital
plus restructuring of social relations, and at the global scale, that
WWII and McCarthyism allowed for last time around. So Keynesian remedies
like 0% interest rates is just pushing on a string.
> ... Finally, wait til you see my concluding paragraph of today's
> installment.
Ok, the penultimate 'graf way below isn't bad at micro-level, but for broader consciouness shifting, I'm still looking for something inspiring and forward-looking, comrade, that will take us beyond Golden Age Keynesianism. Still looking...
***
Los Angeles Times The amount of debt isn't outlandish, and neither is spending
Counterpoint: Doug Henwood
Yes, there's always a risk that the government won't find buyers for its debt. On the other hand, it's not like there's a great rush to buy securities from private issuers either. The stock market is in the tank, municipal bonds are offering two or three times the yield of comparable U.S. Treasury bonds, and junk bonds are trading at by far the highest markup over Treasuries in history. There's a reason that the Treasury sold some bills at 0% interest last week: People want them because they're still the safest game in town. That's the way things go in a financial crisis. And when the crisis passes -- it will, won't it? -- we can always boost taxes on the rich to pay off some of the debt.
Inflation is really our last worry right now. In richer countries that have gone through major financial crises (Japan, Norway and Sweden in the early 1990s, South Korea in the late 1990s), inflation rates fell in the years after the onset of the downturn, as did bond yields. The reason is that the contractionary effects of a financial crisis outweigh the inflationary effects of a debt-financed bailout.
It's a little odd to compare today's federal budget with that of 1975 merely by adjusting for inflation. (I certainly wouldn't call life in the U.S. 33 years ago "hellish" -- I was a lot younger then, still had all my hair and, having no idea of the consumer durables that awaited me three decades later, wasn't disappointed to be listening to music on vinyl and typing letters on a Selectric.) Real GDP is up by 173% over the period. Population and incomes have both grown considerably, as have expectations. So, while government is twice as big, the economy is even bigger. Federal spending was 21.3% of GDP then, and 20.5% now. Relative to the size of the economy, government has shrunk slightly.
Now I certainly would agree that some things should be cut drastically. My guess is that we could have a legitimately defensive military for about 1% of GDP, compared with the present 5.3%; that would save us about $600 billion a year. Ditto the war on drugs, which is expensive, repressive and destroys thousands of lives. And we agree on corporate welfare and farm subsidies too, which are all more likely to help the big guys than small ones.
But, on the other hand, we're spending very little on good things.
What budget geeks call "nondefense discretionary spending," which includes stuff like education, R&D and the environment, accounts for just 3.7% of GDP, way down from its all-time high of 5.2% in 1980. For all Obama's alleged big spending schemes, I'd be shocked if this got up to 4% by 2012. Life would be a lot more civilized in this country if we took all that $600 billion we saved by winding down the Pentagon and spent it on things like making child care and higher education free to all. Fat chance, I know.
Doug Henwood edits the Left Business Observer and does a weekly radio show on WBAI-FM in New York and KPFA-FM in Berkeley.
***
Will America ever be a country without debt? Will the government be able to pay down its debt as the U.S. population ages? Doug Henwood and Brian Doherty finish their debate on deficit spending. December 19, 2008
» Discuss Article (1 Comment)
Today's topic: When will Washington ever be able to pay down its overall debt, which is approaching $11 trillion? Given what's happening with the aging population, when might we be in a position to reduce the debt load? Or will we simply count on a growing economy to make the debt look smaller in comparison to gross domestic product? Previously, Henwood and Doherty discussed the risks of deflation versus inflation in light of the Fed's recent interest rate cuts and how big the national debt should be in relation to the gross domestic product.
Point: Doug Henwood
I have a problem with the premise behind every question for today.
Why does Washington really need to pay down its overall debt? When does any nonhuman entity ever pay down its debt? Individuals do go through a life cycle of accumulating debts while young and reducing them with age (if circumstances cooperate, of course). But why should a corporation or especially a government, whose life spans are usually presumed to be infinite (not literally, but practically), ever pay down its debt? General Electric, one of the most solid of our large corporations despite recent wobbles, has a debt of almost $550 billion supported by annual revenues of $185 billion. GE's debt is equal to almost 300% of its revenues.
By contrast, the U.S. government's debt, "approaching" $11 trillion (actually, less than half of it is held by the public, but let's not quibble), is less than the country's GDP, which is more than $14 trillion -- a 78% ratio.
So by these measures, the government, which has considerable powers to tax as necessary, is in far better shape than GE, which can only hope that people will continue to buy its products. But you never hear anyone complaining about the unsustainability of GE's balance sheet. The worst you hear is that it might lose its prime credit rating sometime in the next few years.
Ah yes, the aging U.S. population. We hear that one all the time. I've been taking these claims apart for a long time (click here for the latest). Yes, the elderly share of the population is going to rise in the coming years, but in 2080, we're projected to have a lower dependency ratio (nonworkers per worker) than we did in 1980. Our major spending problem is an insane system of healthcare finance, which is what's driving Medicare spending through the roof. Paying for retirees isn't anything like the burden that everyone says it is. Our crackpot healthcare system costs far more money and covers far fewer people than the "socialized" systems in more civilized countries.
Finally, counting on a "growing economy to make the debt look smaller" makes such a strategy sound like a confidence trick. But it's an absolutely standard way of measuring the burden of public debt. According to official projections, gross federal debt will be 67% of GDP in 2013; the Congressional Budget Office's projections are a few points higher. That's about what it was when Bill Clinton took office and a little more than half what it was at the end of World War II.
According to the Organization for Economic Cooperation and Development, our debt burden is a little lower than the Euro area and less than 40% of Japan's (pdf). And if we ever get too worried about that burden, we can always tax rich people. That's a much better strategy for the long term than borrowing the money from them. It's OK to borrow big in a pinch, and God knows we're in a pinch right now, but it'd be much better to take their money and spend it on schools and healthcare rather than on paying interest to people who have plenty of money already.
Most of what I've written over the last few days is about the short-term strategies of addressing a profound economic crisis. But there are some long-term considerations as well. One that immediately comes to mind is a fundamental re-thinking of our market-driven, finance-centered economic model. It's badly broken.
Brian, I guess that you would attribute this to too much government interference, but I doubt many would find that persuasive. Since the government is getting so deeply involved in rescuing a private sector that screwed up badly, we could actually do something meaningful with that intervention, such as creating new, publicly owned or cooperative banks. If we're bailing out the auto industry, the government could require equity for the workers and give them seats on the boards of their companies.
The "free market" era is over, but you'd hardly know that from our political discourse.
Doug Henwood edits the Left Business Observer and does a weekly radio show on WBAI-FM in New York and KPFA-FM in Berkeley.