Having pillaged and plundered with greedy abandonment, our First Class
Citizens will take a timeout to allow the coffers to be refilled.
Under the "sensible" guidance of the Democrats, we will have four
years of belt tightening. Then, in four or eight years, the Wall
Street Vultures will, like a plague, descend upon the treasury.
Carl Jarvis
On 9/3/20, Miriam Vieni <miriamvieni@xxxxxxxxxxxxx> wrote:
Rebuilding the Economy Will Require Joe Biden to Think Very Differently
Than
2009
It is a delusion to think that merely injecting money will bring back the
happy mix of jobs and incomes we've lost in the Covid-19 pandemic.
James K. Galbraith
September 1 2020, 7:00 a.m.
US Democratic presidential candidate Joe Biden speaks about on the third
plank of his Build Back Better economic recovery plan for working families,
on July 21, 2020, in New Castle, Delaware. (Photo by Brendan Smialowski /
AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)Democratic
presidential candidate Joe Biden speaks on the third plank of his "Build
Back Better" economic recovery plan for working families, on July 21, 2020,
in New Castle, Del. Photo: Brendan Smialowski/AFP/Getty Images
JOE BIDEN'S INVOCATION of Franklin Roosevelt's New Deal, in the opening
words of his convention acceptance speech, offered a flash of hope that, in
broad terms, the Democratic nominee has grasped the scale of the Covid-19
crisis. Yet before Biden even spoke, the head of his transition team,
former
Sen. Ted Kaufman, undercut that hope, telling the Wall Street Journal that,
in effect, Biden didn't mean it. "When we get in, the pantry is going to be
bare," Kaufman said. "When you see what Trump's done to the deficit .
forget
about Covid-19, all the deficits that he built with the incredible tax
cuts.
So we're going to be limited." After being called out by David Sirota, the
Biden campaign split the difference: There will be "stimulus" in the short
run, retrenchment later.
The reassurance is not reassuring. For, like the Biden-Sanders Unity Task
Force report on which the Democratic platform is based, it confirms that
economic thinking on Team Biden, even among its most progressive elements,
is essentially the same as that behind the Obama-Biden strategy for the
previous economic crisis, from 2008 to 2009. But the underlying situation
now is in many ways much more serious and intractable.
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The 2008 crisis was, at its core, a financial one. It stemmed from a rash
of
financial frauds, which generated a simulacrum of economic growth through
mortgage loans that would never be honored in full - and that were
designed,
and targeted, to ensure that they could never be honored in full. When the
frauds were exposed and the housing market collapsed, millions lost their
jobs; millions more lost their homes. Still, overall and over time, the
crisis was amenable to the conventional "Keynesian" fix: a large injection
of money. The residual arguments over the Obama-Biden program in 2009 are
merely over whether the injection was large enough, and whether a larger
one
might have averted the political backlash that hit the administration in
2010.
Remarkably, although the recovery was slow and neither the labor force nor
homeownership ever returned to pre-crisis levels, the United States was
able
to sustain an economic expansion after 2010. The position of the country
was
helped by an unexpected surge in low-cost natural gas and high-cost oil
production. The expansion was continued, in the first three years of Donald
Trump's term, by large tax cuts weighted to the wealthy and a booming stock
market - the "everything bubble" as it is sometimes called. The jobs
created, it is true, were mainly at relatively low wages. Nevertheless,
they
were created. The U.S. returned to full employment, conventionally defined,
by around 2018. This fact - a slow-motion success story - no doubt bolsters
the confidence now of those who set the policy back then.
The next recovery will not be kickstarted by exports, by business
investment, or by the purchases of durable consumer goods.
The long expansion relied very heavily on the consumer. While personal
consumption had been the source of the pre-crisis boom, and fell sharply in
the slump, its share of gross domestic product recovered after early 2015
and remained throughout well above levels of any previous post-war epoch.
Total business investment, on the other hand, never returned to pre-crisis
levels as a share of GDP and was at the peak in 2015 almost 2 percentage
points below the previous peak in 2005, in part because the digital
revolution reduced the cost of capital equipment and cut into the
brick-and-mortar needs of the business sector. Government spending rose
sharply in the slump and remained historically high, but as a share of GDP
it declined continuously from the start of the expansion until 2020. Thus,
consumer spending was the main sustaining factor for the five final years,
until the pandemic hit.
There are three reasons why the experience of the last expansion will not
be
repeated now.
First, the pandemic has obliterated the global market for many advanced
capital goods in which America excels. Aircraft are a major example. The
civil aviation industry depends on worldwide demand, not U.S. demand, and
world demand is dead so long as more airworthy planes are parked on the
ground than are in the air. In a slightly different vein, the U.S. oil
business turns on a world price. It is doomed so long as the selling price
is half the cost of getting fracked oil from the ground in West Texas.
Construction of offices and retail malls: also dead and done as a
substantial share of clerical work shifts to the home office and of
shopping
to online distributors. The sale of automobiles will slow as commuting and
shopping demand fewer miles of travel, and cars therefore last longer. In
many other sectors, cheap digital equipment will replace expensive
facilities and human labor. Overall, the next recovery will not be
kickstarted by exports, by business investment, or by the purchases of
durable consumer goods. There is nothing that Keynesian stimulus can do
about that.
