Quantcast

Nation Topics - Economy | The Nation

Topic Page

Nation Topics - Economy

Subsections:

Business Economics Labor

Articles

News and Features

On Saturday, February 2, approximately 12,000 demonstrators gathered in New York City to protest the meeting of the World Economic Forum.

The challenge to global capitalism is more relevant now than before September 11.

Enron's power project in India demonstrates who benefits from globalization.

(With apologies to Stephen Foster)

The Enron hearings stretch ahead,
Doo-dah, doo-dah,
Until the final soundbite's said.
Oh, doo-dah day.

Pols will posture night,
Pols will posture day.
They'll show the voters just how tough they are,
Browbeating some CPA.

They'll talk of all the laws they'll make,
Doo-dah, doo-dah.
And meanwhile they're still on the take.
Oh, doo-dah day.

Pols will posture day,
Pols will posture night.
The guy who's shmeered them for a dozen years
Now is the guy they'd indict.

George W. Bush must be feeling an acute sense of déjà vu these days, as the dubious dealings of the accounting firm Arthur Andersen, LLP take center stage in the Enron scandal.

What would Jesus do? It's a no-brainer; he would leave the Christian Coalition, take a consulting job with Enron and then use his divine power to make George W. Bush president.

To the economy, September 11 now appears to have been a transient shock. Sales, confidence and the stock market plunged, but then returned. As the dead cat bounced, optimists declared recovery to be near. The so-called stimulus package died. And so we now face a classic test of the predominant economics: Either recovery will happen, or it won't.

I'm betting against it. For the aftermath of September 11 also boosted the economy in several equally transient ways. Lower interest rates spurred mortgage refinancing. The tax rebates added to personal income and savings. Oil prices fell sharply. Good weather extended the building season. And the automakers took heroic losses to clear their inventories, as did retailers at Christmas. All of this, so to say, fanned the embers. None of it provided new fuel.

Meanwhile, larger depressive forces remain in place. Investment continues to fall; unused capacity continues to rise. The automakers are shutting down and laying off. Consumer spending has slowed. Exports slump as recession deepens around the world. Enormous deficits are opening in state and local budgets, with spending cuts or tax increases already estimated at nearly $100 billion for next year. About 8 million Americans are jobless now, 2.5 million more than a year ago.

Last year's tax cut was supposed to keep America growing. It failed. The Republican goal remains, naturally, to get another tax cut. This is not really economic policy, merely another tactical variation on a permanent agenda. Call it ripoff as a philosophy. Enron writ large.

Democratic strategy has been to help the wounded and hope for the best. Extended unemployment insurance and healthcare would be useful. But they're not enough. Democrats are having trouble leaving their illusions--budget surpluses, debt reduction, "fiscal responsibility." In truth, budget deficits are normal. Right now large budget deficits are necessary. The job is to end the recession, to restore full employment, to recreate conditions for growth. If small steps won't achieve this, large ones are demanded.

Alan Greenspan, meanwhile, has lost relevance. He may cut interest rates some more. It won't hurt, but it won't give us recovery. "Pushing on a string," they used to call it. Business investment won't return until profits do, and that won't happen until consumers have paid down some of their debt. That will take time--maybe a lot of time.

What, then, are the choices? Just two. Temporary, progressive tax cuts may still be considered. One might extend the earned-income tax credit or roll back payroll taxes for three years--meanwhile freezing the 2001 tax cut at present levels in order to reimburse the Social Security trust fund. That would be useful, but the effect would be limited by the need of households to raise their savings and reduce their debts. Half of last year's rebates were saved, not spent. Even good tax cuts would now face the same problem. The egregious 2001 tax cut, meanwhile, should be frozen at current levels, partly to reimburse the Social Security trust fund.

The other choice is: Increase public spending. All now agree that spending, in general, is needed. It follows that if households won't, government must. We need spending not just to provide a temporary boost but to sustain activity until the private sector is ready to spend again. This is the time for schools, transportation systems, housing, the environment, a real energy policy based on conservation and mass transit to cut our dependence on oil, and prescription drug benefits. Why not a new home-health-aide program for seniors? There's work to do. There are people to work. Bring them together!

The most immediate crisis, deserving attention before any other, is in the states and cities. State and local budgets should not be cut. But how to prevent this? By recreating a revenue sharing program for the states, with a pass-through to cities, on a scale sufficient to plug the budget gaps. How much? Let's say $100 billion in the first year. Pass it with very few strings, as a block grant, and get past the Washington gridlock. Revenue sharing has Republican lineage; it ought to be a bipartisan cause today. The federal government should also make it easier for states to borrow in support of their capital programs.

This slump may well get much worse before it gets any better. Accordingly, we must save ourselves. There is no danger in doing too much. This is not a moment for caution. It is not a moment for faith. It is a moment, surely, for action.

Blogs

If the consumer activist wins she will become an essential spokesperson for progressive values in national economic, regulatory and fiscal policy debates.

August 26, 2011

The former senator is organizing a national push to get Democrats on the Congressional “super-committee” to commit to fight cuts to Social Security, Medicare and Medicaid, to oppose any giveaways to corporations and to tax the billionaires.

 

August 24, 2011

The GOP’s CEO candidate revealed his allegiances in the battle to disengage democracy with his declaration that “corporations are people, too, my friend."

August 20, 2011

Dismantling the right’s “class warfare” hysteria, Jon Stewart dares to speak the “p” word.

August 19, 2011

Following an SEC review of its downgrade decision, Standard & Poor’s is now facing a Department of Justice probe and lost business from several municipalities. 

August 19, 2011

On MSNBC, Melissa Harris-Perry praises a Detroit program that provides free and reduced-priced homes to police officers.

August 18, 2011

Vermont Senator: “Instead of balancing the budget on the backs of working families, the elderly, the children, the sick and the most vulnerable, it is time to ask the wealthiest people and most profitable corporations in this country to pay their fair share."

August 18, 2011

After a summer of outside money and fake candidates, Wisconsin’s historic recall elections are finally over.

August 17, 2011

Wisconsin Democrats have reelected their legislators, defeated two Republicans, won a majority of the votes cast statewide and created an opening where a bipartisan pro-labor majority in the state Senate can block extreme measures.

August 17, 2011

The congressional "supercommittee" should consider a grand bargain that takes courage: send people to work, invest in infrastructure, levy a speculation tax, and more.

August 16, 2011