Ten Things Dems Could Do to Win
When we have a big trade deficit, the feds can't run up a debt just to re-employ Americans. As long as we've so much trade debt, we have to figure that a distressing amount of any stimulus will go ultimately to re-employ the workers in China, Brazil, Japan and even Europe, who fill the gap between the "demand" we pump up and what we actually "supply." When we have a big trade deficit, it means that the more we prime the pump, the more we drain out this distressing amount of our national wealth.
And why else did the stimulus run out of steam?
It was probably not big enough, but an even bigger one might have run out of steam. The bigger the trade debt, the less punch there is in running up a deficit. You can't just blame the GOP for cutting the stimulus down.
What's more, on this debt to pump up foreign "supply" we also have to pay out interest to foreigners. The deeper in debt we go, the more likely we are to end up in the clutches of foreign creditors. Don't believe me? The time may come on the left that we'll miss the days when we could rail at Goldman Sachs instead of the IMF.
Yes, in ten or so years the renminbi or even the euro (thanks to Germany) could replace the dollar as the world currency in which we denominate our debt, and our fate will be up to central bankers in foreign countries.
This is no joke: a Babylonian-type captivity for our country is but a presidential term or two away.
What to do? Well, the first duty of a Democrat is to defend the country. We have to win our independence back. The president should give a wartime talk: how over the years, president after president has compromised the sovereignty of our country. And the big reason this happened is that we have too much debt—consumer debt, federal debt, trade debt—because we can't pay our way in the world.
For years, the economic advisers at Harvard et al. told their student presidential advisers-to-be, "The trade deficit doesn't matter."
Well, it does matter. We don't have the same freedom of maneuver in the world.
How do we get it back?
Items 1 through 9 above are all parts of a bigger plan to get us out of debt, every kind of debt. We have to bring back exports, so consumers and Washington don't have to keep coming up with the cash to pay for the trade deficit. That's the "plan." We have to punish investment in the financial sector—if it can even be called true investment at all, and not speculation or a way of holding on to savings, as Keynes once argued.
And we have to reward investment in manufacturing by lowering labor costs in what is left of our globally competitive industry. Yes, along with the stick we need a carrot—to increase the manufacturer's profit margin by taking over nonwage labor costs.
So, for example, we should push for Medicare at 55 to remove that burden on global companies, as we did when we lifted retiree healthcare for Chrysler and GM. (Yes, it makes us more competitive globally, and it's all legal under the World Trade Organization.) Likewise, while we should limit the deductibility of any debt for leveraged buyouts or flipping companies, we should keep it for investment in tangible manufacturing-based production. We should lower labor costs not by lowering wages—goodness no, for that would be a disaster in the Keynesian or any other sense—but by having the government (yes, taxpayers) assume the nonwage healthcare and other costs—the only way to send a signal to investors that they had better get out of financial speculation and into manufacturing.
As Keynes would tell us, play on their psychology. Let investors know the "water is friendly"—not by penny-ante things but the big stuff. Yes, we on the left should even propose steep cuts in corporate taxes in manufacturing and offsetting them with higher taxes on financial firms, to give an even bigger Keynesian-type shock to get investment in manufacturing.
And we need a new corporate model—which gives human capital at least some modest check, as in Germany, over the allocation of financial capital.
That's the plan—to sell more abroad so we can all get out of debt.
From now on, this country has to be lean, mean and stripped for global competition.
And if we, the great-grandchildren of the New Deal, can bring all these things to pass, then FDR will smile upon us and say, "At last, children, you've done something for your base." Then our base will be glad to let us take on other things—perhaps even, before it's too late, to dial down global warming.
But we have to be in power. So if we want to save the planet, we better save the country first.