Despite dramatic reductions in the nation’s unemployment rate, which is now at five percent, economic growth sputters.
Meanwhile, the financial sector racks up ever-increasing profits and sits on mountains of cash, deposited here or abroad, but mostly the latter. It does the Rest of Us little good to have so much idle money. Better that it be invested in the “real economy,” as Joseph Stiglitz puts it in an op-ed for The Guardian. That capital is being hoarded rather than spent testifies to perverse incentives, whether or not intended. He writes:
But the dominant policies during the post-crisis period – fiscal retrenchment and quantitative easing (QE) by major central banks – have offered little support to stimulate household consumption, investment, and growth. On the contrary, they have tended to make matters worse.
We find ourselves stymied by rock heads, compliments of conservative’s stubborn insistence on presumed fiscal rectitude. Government debt is inherently and forever bad. Indeed, as we all know from Saint Ronald, government itself is wretched, so it must be starved at all cost.
And that cost is at the expense of the Rest of Us. Stiglitz implies that only the government now can unleash the economy, since the private sector refuses to return their accumulated capital. Stiglitz:
Perverse incentives are only one reason that many of the hoped-for benefits of low interest rates did not materialise. Given that QE managed to sustain near-zero interest rates for almost seven years, it should have encouraged governments in developed countries to borrow and invest in infrastructure, education, and social sectors. Increasing social transfers during the post-crisis period would have boosted aggregate demand and smoothed out consumption patterns.
Ah, but the damn Republicans. They continue to stand in the way of such investments. Let’s look at U.S. government spending.
There were, and still are, plenty of opportunities to stimulate the economy, despite private hoarding. Money is very cheap these days, and there is much to do that would enhance economic output and put people back to work at better-paying jobs.
While the federal debt as a percentage of GDP has fallen over the last few years, Stiglitz suggests that public investment can be funded by taxing bad things, especially carbon, rather than adding more debt. But the rock heads actually proclaim that carbon is good for you, as they deny global warming and its obvious effects.
Oh, and speaking of debt. Look at the chart below.
Notice that the ratio was steadily falling until…wait for it…Saint Ronald. He championed lower taxes, dramatically cutting marginal rates, thus reducing federal receipts. Then the number fell during Clinton, before rising with Bush II. It jumped sharply during the Great Recession, which, I would argue, was a direct consequence of the house-buying-and-selling frenzy facilitated by G.W. Bush and his boost of home ownership. The lenders were only too happy to oblige, knowing that they could get away with murder under the conservative regime.
As I’ve said before, Republicans pose an existential threat to all of us. I shudder at what will surely happen should they control everything.