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samboct -> RE: Paying the Tab (10/22/2008 4:38:24 PM)
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We're not going to fix things as long as history remains our greatest educational lack- and judging by some of these responses, that's not happening anytime soon.
To anyone who thinks that we will be able to fix this mess by having the government curtail spending and belt tightening- I suggest you look at Herbert Hoover's approach to the depression of the 1930s.
There are two options:
1) The financial system implodes- all debt is written off, and the gov't prints new currency. Existing greenbacks will buy a fraction of the new currency. This will be the result of "belt tightening" and the Euro will become the global currency. "Belt tightening" can't work-you can't get blood out of a stone, and as Pahunkboy is fond of pointing out- we have a large deficit hanging over us. The economy isn't large enough to support paying off the debt in this fashion and it will become increasingly uncompetitive.
2) Somebody smart figures out that the government needs to prime the economic pump by spending- even if the debt and taxes increase. Government spending must be in areas which can grow-basically green technologies, education, infrastructure, etc. Military spending has to be slashed. We are going to be at increased risk from terrorist attacks- its another legacy of the Bush administration and Reaganomics. The only way out of this mess without defaulting is to grow the economy and quickly.
Costs of growing an economy quickly-
1) Increased risk.
2) Retirement becomes much riskier.
3) There needs to be a transfer of wealth to the younger generation. This probably means triaging health care and taking money from this sector and dumping it into education and infrastructure.
4) Higher taxes on upper brackets. One of the things that has really aggravated me about the Republicans claim of lower taxes is that its irrelevant. What I want at the end of the day is more money in my pocket. I'm certainly willing to pay higher taxes if my wages go up enough to compensate. We've seen silly little tax breaks and wages heading in the wrong direction over the last 7 years. I'll pay higher taxes if the economy grows. Of course, for people living on a fixed income- higher taxes are an anathema. Tough.....
5) Finance can no longer play such a large role in the economy. See the example of England prior to WWII versus Germany. England tried to be the world's banker- and the resulting debacle so hollowed out their economy that Churchill had to beg for a lousy 50 WWI destroyers and trade bases because they didn't have the cash to pay for them. Yes, the UK was widely seen as a wealthy country- but in practice they weren't. I hope we're not as far gone as England. However, we must rebuild our manufacturing base. A service economy will not bail us out of this mess- we need the higher wages of a manufacturing economy.
At the end of the day- the best measure of real growth in an economy is growth in real wages. Everything else is smoke and mirrors.
A couple of practical solutions-
1) Yes, we need to bail out the financial institutions. Japan let theirs collapse out of a similar sense of moral outrage and they lost a decade. I don't like it any more than you do.
2) Burning Greenspan in effigy should be a national holiday and schoolchildren should participate as long as the effigies are domestically sourced, or better yet, constructed by schoolchildren who need to understand that blind faith in the "oracle" has lead us to this mess. Democracies need informed debate, and Greenspan squelched that.
3) Social Security needs to be revamped- it's time to go to needs testing.
4) Enact tort reform for the medical profession. Continually escalating medical costs are killing the growth of businesses and fundamentally, this is a legal problem. The only role that insurance should play in medicine is for catastrophic care- otherwise its pushing expensive paper rather than delivering medical care.
5) Get out of Iraq and end military recruitment. If we have a real threat to the nation's shores, we'll deal with it. Otherwise, it's time to quit trying to solve the problems of the world unilaterially. We MUST reduce our military expenditures- not only in Iraq, but throughout the globe.
6) Put a tax on oil production/ coal production/gas production and imports that reflects its true costs to make the economics of renewable sources of energy transparent. If we add in the cost of the ongoing Middle East conflicts and what we've spent militarily- what is the true cost per gallon? We need to push solar, wind, biofuels, geothermal and improved energy storage and transmission technologies. There are no fundamental problems with renewable energy sources- it's an engineering problem that's been shunted aside for far too long. Nuclear is an option, but I for one am not convinced that its necessary or timely enough. It's a lot faster to bring wind farms on line than a nuke plant, and there aren't that many regions of the country where they really work well. (OK, the Northeast is one of them.)
How's that for a start?
Sam
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