Against balanced budgets

"Think how many times you have heard conservative politicians say that since businesses and households have to balance their budgets, government should do the same. But individuals and businesses separate out their current expenses from their capital outlays; people don’t define themselves as running a deficit this year because they bought a new house for $200,000. No, they finance capital expenditures like houses, new kitchens, and automobiles by borrowing, and they count themselves as living within their means as long as they have income to cover all their expenses including interest payments." - Fred Block (UC Davis sociologist) in Dissent

Obama has vowed recently to halve the deficit. Now this isn't necessarily as bad as it sounds: it depends on whether steps taken to accomplish this are sensitive to both 1) whether such steps take into consideration fixing current economic conditions and 2) whether such steps would lay the groundwork for extending the increases in spending indefinitely. As Block points out, we are already hearing Republicans blathering about how we are 'deferring the cost of this stimulus to our grandchildren' blah blah, etc. But its important to note that this sort of blathering is about 4% true. If the current attittudes and policies toward taxation remain unchanged then it is true that any ambitious spending regimen will be threatened in the long term unless changes are made. This does not meant that the government needs to 'balance its budgets' at some point in the future. However it does mean, at least, that budgets must be restructured in order to put spending initiatives on firmer political ground so that deficit-hawks and other 'free market' zealots will have a much harder time assaulting the social spending when/if economic conditions improve.

As Block puts it: "one essential issue has yet to be engaged or discussed: changing budget procedures to facilitate a long-term increase in government investment spending." 'Balanced budgets' are the reason "why we have a $2.2 trillion backlog of needed repairs to our decaying infrastructure...why our vital research and development machinery is generating fierce battles between different interest groups fighting for a piece of a shrinking pie....why our education system... is increasingly threadbare, dysfunctional, and ineffective in facilitating upward mobility." Glaringly omitted here is "this is (one reason) why we have decaying public health insurance programs (medicaid, medicare) and the worst health insurance system among all Western capitlaist nations because public money is not spent guaranteeing universal access".

Block proposes creating two different Federal budgets: a 'current account' and a 'capital account', where the 'current' acct would be kept in balance (except during reccession) and the 'capital' acct would be financed by borrowing. I'm not sure whether this is a good idea or not, but such a plan's raison d'etre (facilitaing large spending initiatives) is far more attractive than that of deficit-hawking (i.e. strangling the ability of the government to spend).

Concretely, Block proposes the following:

"First, the Obama Administration needs to begin right away developing plans for big ticket infrastructure projects to assure that they will be “shovel ready” over the next three to five years. Now is the time to map out, prioritize, and secure public support for multi-year projects of building high-speed rail lines, modernizing mass transit systems, and facilitating the replacement of coal and oil with green energy. Second, there needs to be an “all hands on deck” offensive to persuade the public of the urgency of this budgetary reform."

While Block's criticism of the current stimulus is (correctly, in my view) that it 'doesn't go far enough', perhaps the same should be said of his propsoals. Nonetheless, the general trajectory of his plan sounds infinitely more attractive than what the Administration seems currently interested in doing. Both parties typically cannot restrict themselves from gushing over the virtues of 'balanced budgets' as though they were glorious ends in themselves. Block is wrong to say 'conservatives' are the only ones pushing them, unless he meant to include a large amount of Democrats under the designation 'conservative' (a move I wouldn't resist in the least).

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Reaping the fruits of "reaching across the aisle"

"SO WHY does the stimulus legislation contain so many half-measures? After all, Obama's inauguration four weeks ago was celebrated by huge numbers of people, and his popularity remains high.

For one thing, the Republicans presented a virtually united front against the stimulus bill, and the mainstream media reported their every slander of the proposal without hesitation. "One might have expected Republicans to act at least slightly chastened in these early days of the Obama administration, given both their drubbing in the last two elections and the economic debacle of the past eight years," wrote columnist Paul Krugman.

But no. The GOP trotted out every tired complaint about "big government" and wasteful spending--this from a party that ran up a staggering government debt over eight years of George W. Bush, thanks to the astronomical sums wasted on the Pentagon war machine.

Still, the Republicans shouldn't have been able to gain the upper hand in this debate. They did because of the new Obama administration's insistence on cooperating with the GOP in the spirit of "bipartisanship."

For at least the first several weeks after Obama's inauguration, while the White House was talking about how much it valued their input, the Republicans were able to define the stimulus legislation on their terms. That meant depicting it as stuffed with "waste" and "political pork" to reward Democratic "interest groups"--rather than a collection of measures that could create jobs and bolster working people's living standards."

-From the ISO's excellent breakdown of the Obama Stimulus Plan.

The NYTimes has a nice breakdown here. And here.

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CNN likes inane polls

Has that ever been a point of contention at any point in this stimulus debate? I'm pretty sure the question is about whether or not the economic stimulus bill contains items not directly related to strengthening the economy or creating jobs (It doesn't). Have you heard anyone argue that it ought to include spending that doesn't serve that purpose? The question is so terribly misleading and such a straw man, not to mention falls right into the Republican talking points.

Tomorrow's likely CNN poll: Do you think women should be forced to have abortions?

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Venkatesh, Galbraith, et. al Debate Obama Stimulus

Full text of the debate/panel here.

Excluding the conservative idiots who are whining about spending increases, there are some interesting points in this exchange.

For Galbraith, the stimulus is not bold enough (or commensurate with the gravity of the crisis at hand). Stiglitz said virtually the same thing when he told the BBC today that the Obama Stimulus package is "totally inadequate". He recommends the following ideas (which sound marvelous to me):

– All the resources being released from residential and commercial construction should be taken up in public building. At the federal level, strategic investments in mass transit and other long-term improvements — largely omitted from the current package — should be authorized via a permanent National Infrastructure Fund.

– Comprehensive foreclosure relief, through a 90-day moratorium followed by restructuring except in cases of demonstrable borrower fraud.

– Increase Social Security benefits, say by 30 percent, and a lower the eligibility age of Medicare to (say) 55 years of age. This would offset the deep drop in equity wealth of the elderly population, while favoring the poor. Expanding Medicare eligibility would permit more workers to retire, freeing firms from carrying health care costs for older workers.

– A payroll tax holiday to restore the purchasing power of working families. By setting the payroll tax rate at zero (and letting the government write a check to the Social Security Trust Fund for the uncollected sums), tax relief can be delivered at large scale and with immediate effect. Later, if growth resumes rapidly, this measure could be scaled back.

– A Reconstruction Finance Corporation, to meet industrial needs for credit and to help with restructuring and modernization.

– Jobs programs, in the spirit of the New Deal, to hire people to do what they do best, including art, letters, drama, dance, music, scientific research, university teaching and the work of the non-profit sector — including for community organizations.

– An energy program with a framework adequate to meet the climate crisis and sufficient to reduce demand for oil and quell speculation as the economy recovers.

Michael Oppenheimer argues, correctly in my view, that infrastructure spending must be spent with the future in mind (which is to say, the environment and climate change). In concrete terms (no pun intended) this means eschewing highway construction/expansion in favor of mass transit and greener forms of transportation. He writes:

The trade-off between building new highways and expanding or even just maintaining mass transit capacity is an obvious example. Both are “shovel-ready” but one supports the emergence of a green economy while the other just ossifies the existing patterns, which are a big part of our economic and international problems in the first place.

Steven Goldsmith, presumably in an attempt to sound unique or creative, argues that what America needs more of right now is a boost in volunteerism. Thus, he recommends an increase in funding for Americorps. I say fuck that. People need jobs not charity, and getting well-off people to volunteer is, at best, an idea that is peripheral to the main thrust of any serious effort to stave off disaster for ordinary Americans.

Venkatesh argues that the stimulus needs to be more 'locally oriented'. Yet, the examples he gives:

For example, two cities (or counties) can independently spend millions to shore up new transit systems. Yet, a regional focus might more efficiently and effectively serve a population whose movements cut across their borders. Giving unemployed workers subsidies to retain their health benefits is progressive, but in some metropolitan areas, workers are facing eviction and would much prefer rental subsidies. Averting homelessness might take priority over a doctor’s visit.

beg the following question. Why not do both (avert homelessness and guarantee health subsidies)?

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