Foreign Policy

The New Economics

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More government spending, or...

With the world reeling from a recession and painfully slow recovery '- we hear all sorts of political pronouncements as to what the solution is -' as if anyone really knows. To the Republicans and the Tea Party the enemy of jobs is big government -' government spending -' and the vast "unsustainable" national debt. Cut all that and jobs will miraculously appear.

To the Democrats, we hear agreement that spending has to be more in line with income so increased taxation on the most wealthy 2 percent is in order but at the same time we need "investment" in infrastructure, science and education to assure jobs in the future.

Senator Mitch McConnell says when he hears the word "investment" he hears the words "more government spending". I am surprised that the Democrats have not retorted that when they hear the word "Cuts" they hear the worlds "firing people - higher unemployment". McConnell is correct, investment means spending but then again cuts definitely mean increased unemployment. Britain is proving that right now.

On the radio listening to my favorite XM station POTUS I was surprised to hear a Republican Rep state that "you can't borrow and spend your way to success". Thinking about that statement for a second made me realize that if that was true all the banks in the world would be out of business. Banks are all about loaning money to people who then spend to create a business after which they then repay the bank with interest. So of course you can borrow to spend and that lead to success. Most new businesses are created that way. It takes money to make money.

Meanwhile in reality no one has really focused on the fundamental reason why there are so few jobs. For the Egyptians it is NOT Mubarak as the source of all their ills. Democracy will not automatically fix the lack of jobs. For us Americans big government and the deficit -- NEITHER of these have any real affect on the job market. The reason there no jobs is quite simple -- American labor is too expensive in relation to labor in other parts of the world. If Americans would work for a few Dollars an hour jobs would come flooding back at a rapid pace. Why would I want to make something in Bangladesh if it was just as cheap to make it here close to home? Given it is substantially more expensive to hire an American than an Indian, Chinese or Bangladeshi will mean jobs will stay over there for the duration whether we have a big government or a small one. If we want to identify the enemy of jobs here in America we should not be looking at Government size but at Government policies that add to the cost of hiring an American. Anything that adds to the cost is a disincentive to hire.

Thinking this simple truth through -- and also knowing that the US has been putting pressure on the Chinese to revalue their currency upwards makes one think that the same affect would be created by devaluing the Dollar (except that the Chinese peg their currency to the Dollar). Devaluing the Dollar also means it lowers the price of American labor vis a vis the rest of the world so contrary to the Republican fears about the deficit being a job killer ' in fact the opposite could be true. The lower value Dollar would help exports and the lower value Dollar can be achieved easily by increasing the deficit.

Meanwhile the most fundamental truth that has been missed by the current economic thinking, especially among the Republicans, is that we have not faced the fact that capitalism only works well on an even playing field. When the playing field is skewed -- as where a monopoly operates it does not work well at all. In fact all this faith in capitalism and the "free market" is entirely misplaced when our main competitor is China -- a country where Big Government and industry are in alliance. If anything we need our own Big Government if we have a hope of competing. Private companies need greater resources to be able to compete and only government can provide that with a long term view. We have all seen the short term thinking of Wall Street and that certainly is no ally to think building for the long term. Wall Street is a world of quarterly reports and my bonus THIS year and screw a few years down the line. Simply put -- our real competitor is Capitalistic Big Government (China) and it is growing at an alarming rate. So if we are pushing for small government and that government to stay out of business leaving it to the private sector alone how is that private sector going to fare against the real competitor we face TODAY?

The future of America depends not on big or small government -- size in itself does not matter -- but good and smart government thinking long term to balance the natural capitalistic short term thinking. It also depends on lowering the cost of American labor and new innovation ahead of everyone else (which will be harder and harder in years to come). In other words -- looking at the world as it IS not as we would like to be -- shows the Republican mantra to be completely backwards. Harking back to the days the Constitution was created makes great sound bites but does not deal with the reality of the 21st century. Right to bare arms when it was a world of flintlocks is one thing -- in a world of mass killing assault rifles it is quite another. Small government and states rights hundreds of years ago made sense -- facing the weight of over two billion people in India and China committed to advance their interests over ours means we have to think again and wake up to today and not dwell on some romanticized past. Hell our founders did not believe in Democracy anyway -- except for the precious few -- land owners like themselves. Fifty percent of the population were denied as they were the wrong gender, and another percentage who were slaves. So lets not glorify them beyond reality.

If history has taught us anything it is that you cannot go back to the past. Learn from it by all means but identify the changes in the game as they happen and adapt. I fear the Republicans are so set on the past they have identified the wrong dangers and wrong enemy and therefore are set to launch us on a path to deny what is actually reality. Looking on global warming as a hoax perpetrated by scientists is but one small example. Taking our country "back" from who is never said, is another. Its all about going back to when it was better and good ol' American values were held in regard. When that was -- a date '- is never specified for obvious reasons. We cannot go back. We are smarter than that. It is time we used our brains and applied common sense to what we do instead of following party dogma. That goes for both sides of the isle but at the moment it is the Republicans who mostly need to do a drastic rethink and wake up to the fact this is the 21st century and the game has changed. One thing fr sure, going back is not an option.

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Updated Jan 2, 2019 12:29 PM EST | More details


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