The magical art of economics makes sense to me only in real-life analogies. I know some of the jargon and find it nearly as fascinating as the art itself. High practitioners possess a comprehensive, pragmatic and effective understanding of (1) where we are in history; (2) what the future holds; (3) what we’ll need to bridge the gap; and (4) what the probability is that particular events will effect our forward outcomes. The last one calculates a dizzying array of data and impressions from climate change and famine to sonograms and pancreatic cancer. Economics is the Buddhism of the Magical Arts. In fact, this blog could have been entitled, “Breathing is Economics.”
If a patient’s heart stops, it needs a big jolt to act as if it’s alive. That initial jolt is a pretense: whether we’re re-starting a heart, a battery or an economy, the initial stimulus is a second chance, not a fix. Without fuel to keep the engine charged, another shut down is inevitable. (If a mixed metaphor works, then what do we care? It’s the gestalt we’re getting at here.)
The current inside-the-bubble discussion is about whether Obama’s Stimulus creates enough jobs OR if it’s a wish list of forward-looking investments. (This is the basis of the stock market which predicts which products will get us from here to there.) The real question should be: does it create or save enough jobs to give us confidence in the future AND does it anticipate building the educational and technological bridges that will support a recovery? In other words and to reference an Obama quote, “Can we walk and chew gum at the same time?”
The economic stimulus has to to be big enough to convince us that an innovative, smart economy is in the offing. Of necessity, an economic growth package has to create sustainable manufacturing and service sectors. So, we must invest in education and the body politic (arts, humanities, science and technology). We must stimulate new economies and continuing education that green the planet, generate well-health care and build local communities.
Both the stimulus and growth plans must prove our commitment to ethics and to a workforce that values and can afford to buy what it produces. Our decision making and its process must prove we’re commited to a republic not an oligarchy.
On my birthday (January 27th) Jon Stewart suggested a stimulus plan that would eradicate our consumer debt (including mortgages) and inject lending institutions with capital. The simple beauty of his plan lacks details and leaves much to debate, but it pinpoints the vital starting point: worker-consumers. As long as we’re afraid that debt and job losses are going to drag us over a cliff, we’ll buy only necessities. Demand for products will continue to slide and it’s ridiculous to invest in companies whose products won’t be bought. Combined with very little credit to grease the gears, the world economy is grinding to a halt. While Jim Cramer waxed poetic about recession-resistant stocks like Johnson & Johnson and Colgate Palmolive, we were buying generics at the dollar stores. Our real lives are moving faster toward pragmatism than the stock market can anticipate or pundits in a bubble can predict. Luxury and impulse buying are gone. We’re cleaning our own houses, cutting our own hair, plowing our own drives, mowing our own lawns, making our own yogurt and bread, fixing our own plumbing and growing our own veggies. (See the Foxfire Books. A Foxfire Christmas is particularly cool, I think.) We’ve wakened from our consumptive coma and we’re haunting second hand shops and buying toilet paper for Just-A-Buck. (If you’re new to this, find an old hippy who still looks like an old hippy and find out where s/he got her/his clothes, food and that nifty snowblower. Also, check out Freecycle. It’s an astonishing source of free stuff.)
Sorry. Back to Jon Stewart’s economic stimulus.
He’s proposed a new place to begin and called the scheme “trickle up.” Months ago, I suggested a direct infusion of funds to local employers in order to stem job losses. Both that idea and Stewart’s shore up the foundation of the pyramid and frankly, as long as we jolt the core and build from the foundation, I don’t much care how we do it.
There are a blizzard of details to sort through of which these are just a few:
Regulators and people facing foreclosure may not know which caballic entity holds their mortgage debt today, but consumers know which bank and loan officer approved it. Do we give the money to the originating bank who may have issued a lousy loan? Remember, the patient’s heading for complete cardiac arrest. We don’t have time to worry about which arteries messed us up; we need to jump start the heart. Some greedy consumers and banks will be rewarded. It’s an unfortunate consequence that common sense suggests we must swallow.
Would every consumer get $15,000 to pay down or eliminate non-mortgage debt? Would we modify corporate debt? Or, would we limit debt cancellation to locally-owned and/or -operated businesses with healthy, symbiotic relationships to their workers and communities? (Nirvana, that and probably fraught with legal challenges. Not to mention how few locally-owned and/or operated businesses are surviving the early carnage.)
Which mortgage debt do we wipe out? Do we subsidize all properties that have lost value since purchase or only property holders who’ve lost or are in danger of losing the property? Do we include only the primary home or do we help the retiree who bought a vacation home as a retirement investment? Do we consider residential and commercial mortgages? Do we have time to look at the community-at-large? Can we afford not to?
We don’t have time to re-value each mortgage and credit card so we might have to pick a pay-back percentage which all parties accept as whole. If we owe the credit card company $10,000, the company has to agree that $1,000 (10 cents on the dollar) makes them whole. Then, Linens & Things and Circuit City (the bankrupt companies where we bought our towels and computers) have to accept $5 for a $50 bed sheet and $100 for the $1,000 computer they sold. (I’m not saying it’s a bad deal, but part of the equation is that when franchise retailers go out of business, we lose the under-compensated jobs many of us have been “educated” to fill.)
It’s gnarly; but so is the idea of a trillion dollars going directly to banks in hopes they’ll get around to re-financing our debt. They won’t. Not just because they’re greedily waiting to scoop up the weaklings, but because they’d be crazy to lend money in a sliding economy without substantial government investment in the future.
Increasingly violent hurricanes, floods, crop destruction, water pollution and water wars are events that threaten our basic food supply and our economic forecast. They demand resources for fixing rather than prevention.
Our transportation and electric grids are so unreliable that year-round, millions of people are left for weeks without heat/air conditioning, electric and water in the wake of storms. When our transportation arteries aren’t flooded, they’re rendered impassible by ice. They’re pocked with axle-busting potholes and our bridges are crumbling. “Bird strikes” pose a known and unpredictable threat to our air transport, for cryin’ out loud.
We’ve got plenty of work to do–plenty of valuable jobs to fill. If an economic plan includes a large enough jolt and forward-thinking investments, then it stands a chance of succeeding. (See: House Bill and Senate Bill at Thomas.gov.)
A small note on “Sin Taxes.” Many of us can’t afford the pleasures of vacations, monthly trips to the movies or fresh fruits & veggies, so we cling to our cheap substitutes: fast-fat-sweet-salty-food, cigarettes, dope and beer). It isn’t a pretty picture (especially for the children) but if we’re going to tax sin, then we need to think of it in terms of a population that can’t afford regular trips to a therapist.