Obama’s Budget Freeze and America’s Economic Decline
A budget freeze in the middle of a (curiously depression-like) recession? That’s about as smart an idea, economically speaking, as gulping down a bucketful of magma just because you’re thirsty. It’s even worse than Hoovernomics, because we have, today, the benefit of hindsight.
And though it’s probably just PR shadowboxing, a “spending freeze” is actually perfect illustration of the big problem with Obama’s economic policy. So far, it has accelerated — instead of decelerated — three transfers of wealth:
A transfer of wealth from Main Street to Wall Street. As Robert Reich has noted, the freeze disproportionately hurts Main Street. Wall Street got bailed out — and a spending freeze, now, is just another way of saying Main Street has to pay for it. In my last post, I referred to it as a War on the American Dream.
A transfer of wealth from young to old. America’s debt wasn’t racked up just last year, but over several decades. Its burden will fall disproportionately on tomorrow’s citizens. (That’s what my Generation M Manifesto was really about.)
A transfer of wealth from human people to corporate “people.” America’s debt, in a very real sense, is a consequence of corporations evading their responsibilities as citizens, and failing to provide services that matter. If we had a working healthcare industry, for example, healthcare might not have to be so heavily subsidized. Instead, pharma players have booked huge profits for decades, while America’s racked up debt to essentially pay for it. (Connect the dots: one of the biggest components of the deficit is healthcare costs; healthcare costs so much, in part, because drugs are sold at significantly higher prices to Americans than abroad; higher drug prices yield nice margins for pharma players.) Today, it’s real people who carry corporate people on their shoulders — not vice versa.
Let me put it as simply as I can: These are fatal vectors.
Economies that transfer wealth in these directions cannot survive — let alone prosper. Their resource bases, productive bases, knowledge bases, skills bases all implode. And the very fabric of trust that binds all of the above frays and disintegrates.
The problem we face isn’t the problem we think we face. America’s looming debt crisis is the consequence, not the cause. What are the root causes of America’s addiction to debt?
The root cause is what I’ve been callingdumb growth: short-term, consumption-driven, polluting, economically meaningless growth. Think Hummers, Big Macs, and McMansions. America doesn’t make products and services of earth-shaking, awesome value — it consumes stuff. So much stuff that we failed to adequately build yesterday’s industries — which is why they needed bailing out. And today, we’re bailing them out, instead of building tomorrow’s industries. Worse, the stuff we so ravenously hyperconsume is traded on an uneven playing field. We’re eating the future.
The way to close the gap between what we spend and what we earn isn’t to stop investing in tomorrow — a spending freeze. That’s a recipe for economic implosion.
The answer is a smarter kind of growth. Here are its four pillars. Smart growth reverses the fatal vectors above. When economies set the stage for smart growth, wealth isn’t just transferred — unfairly and self-destructively. It is created anew. That’s the key to an authentic, shared prosperity — not just the illusion of one.
Consumo Ergo Sum: “Fatal Vectors” in the US Economy
January 28, 2010 by michaelstafford