directly to small business, homeowners and projects rather than
to lenders who don't loan, siphon off billions to themselves, with no
regulations to stop any of it as American jobs hemmorage, the national
mood would be different, markedly. Surely, Baker, Obama and others
see this. How long can we survive this fundamental dichotomy?
The dynamic is expanded in Reich's article.
Ed
http://www.guardian.co.uk/commentisfree/cifamerica/2009/aug/10/us-unemployment-economy-stimulus
The case for no stimulus
By Dean Baker
guardian.co.uk,: August 10, 2009
There are a large number of politicians in Washington who are pushing a
brilliant policy that will have the effect of leaving millions of people
unemployed or underemployed for years into the future. Their policy is
called "no stimulus".
The idea is that we just let the recession brought on by the housing crash
run its course, being careful to do nothing further to boost the economy.
According to most projections, after four or five years the economy will be
back on track, with the unemployment rate approaching the pre-recession
levels. In the mean time - the rest of 2009, all of 2010, 2011, 2012,
probably much of 2013 and maybe even some of 2014 - millions of people who
otherwise would be working will be unemployed or will only be able to find
part-time employment, even though they want full-time jobs.
The unemployed are likely to experience some hardship during this period
since the country system of social supports is very much oriented around
work. Many of the unemployed will lose their health insurance coverage and
their homes and will have difficulty providing for their children. Even the
temporary extension of benefits only covers 52 weeks of unemployment in most
cases. After that, unemployed workers may be eligible for food stamps, and
their kids may qualify for the state children's health insurance programme,
but they will get little help from the government in meeting other expenses.
This excess unemployment also implies losses to the economy. People who
could otherwise be doing productive work will instead be doing nothing. To
some extent this lost output is attributable to lost consumption. People
will buy fewer cars and restaurant meals and pay less money for their kids'
healthcare and education.
However, some of the lost output will also take the form of lost investment
in both the private and public sectors. Businesses who see slack demand and
have poor earnings because of the downturn will delay modernising their
businesses and expanding their capacity. State and local governments will
cut back on maintenance and put off new infrastructure projects under the
pressure of recession-induced budget deficits. But the advocates of "no
stimulus" are happy to forego these investments in the country's future.
The cumulative lost output from the housing crash recession is likely to
exceed $6tn, more than $40,000 for an average family. But, this is only
20-times as large as the "huge" budget shortfalls that the media warn could
result from President Barack Obama's healthcare programme. The proponents of
"no stimulus" argue that we should not be worried about such trivial sums.
For the "no stimulus" proponents, what is really important is that the
United States government issue as little debt as possible. If the government
issued more debt, then our children and grandchildren would own more US
government bonds. This would mean that future generations would be paying
taxes to pay the interest that they receive on the bonds they hold. In some
cases, the same people who owned these bonds would be taxed to help pay the
interest on the bonds they own. Imagine that.
Some advocates of stimulus misunderstand the proponents of "no stimulus" and
think they are worried about foreigners, like the Chinese government,
holding our bonds. In fact, the budget deficit has no direct relationship to
amount of government debt held by the Chinese and other foreigners.
Ownership of the government debt by foreigners is determined first and
foremost by the US trade deficit, which is primarily determined by the value
of the dollar: the higher the dollar, the higher the trade deficit. A high
dollar makes US goods expensive to foreigners and imported goods cheap for
people in the US. Therefore when the dollar is high, we buy more imports and
export fewer goods.
If the "no stimulus" crowd was concerned about becoming indebted to China
and other countries then it would be pushing for a lower-valued dollar. In
fact, most of the "no stimulus" crowd supports a high or "strong" dollar. So
they actually want the US and our children to become more indebted to China
and other foreign countries.
Most people would think that it would be hard for politicians to support a
policy that will cause tens of millions to be unemployed or underemployed,
that will lead to trillions of dollars of lost output and that will
constrain the investments that would make our children wealthier in the
future. But the "no stimulus" crowd are not ordinary politicians. They are
prepared to push their agenda no matter how much suffering it inflicts on
people today and our children tomorrow.
It's too bad that there are so few politicians that care about the people
who vote for them. If they did, the "no stimulus" gang would be chased out
of town.
***
How the White House's Deal With Big Pharma Undermines Democracy
When an industry gets secret concessions in return for a promise to lend its
support to a key piece of legislation, we're in big trouble.
By Robert Reich, Robert Reich's Blog: August 12, 2009.
I'm a strong supporter of universal health insurance, and a fan of the Obama
administration. But I'm appalled by the deal the White House has made with
the pharmaceutical industry's lobbying arm to buy their support.
Last week, after being reported in the Los Angeles Times, the White House
confirmed it has promised Big Pharma that any healthcare legislation will
bar the government from using its huge purchasing power to negotiate lower
drug prices. That's basically the same deal George W. Bush struck in getting
the Medicare drug benefit, and it's proven a bonanza for the drug industry.
A continuation will be an even larger bonanza, given all the Boomers who
will be enrolling in Medicare over the next decade. And it will be a gold
mine if the deal extends to Medicaid, which will be expanded under most
versions of the healthcare bills now emerging from Congress, and to any
public option that might be included. (We don't know how far the deal
extends beyond Medicare because its details haven't been made public.)
Let me remind you: Any bonanza for the drug industry means higher
health-care costs for the rest of us, which is one reason why critics of the
emerging healthcare plans, including the Congressional Budget Office, are so
worried about their failure to adequately stem future healthcare costs. To
be sure, as part of its deal with the White House, Big Pharma apparently has
promised to cut future drug costs by $80 billion. But neither the industry
nor the White House nor any congressional committee has announced exactly
where the $80 billion in savings will show up nor how this portion of the
deal will be enforced. In any event, you can bet that the bonanza Big Pharma
will reap far exceeds $80 billion. Otherwise, why would it have agreed?
In return, Big Pharma isn't just supporting universal health care. It's also
spending a lots of money on TV and radio advertising in support. Sunday's
New York Times reports that Big Pharma has budgeted $150 million for TV ads
promoting universal health insurance, starting this August (that's more
money than John McCain spent on TV advertising in last year's presidential
campaign), after having already spent a bundle through advocacy groups like
Healthy Economies Now and Families USA.
I want universal health insurance. And having had a front-row seat in 1994
when Big Pharma and the rest of the health-industry complex went to battle
against it, I can tell you first hand how big and effective the onslaught
can be. So I appreciate Big Pharma's support this time around, and I like it
that the industry is doing the reverse of what it did last time, and airing
ads to persuade the public of the rightness of the White House's effort.
But I also care about democracy, and the deal between Big Pharma and the
White House frankly worries me. It's bad enough when industry lobbyists
extract concessions from members of Congress, which happens all the time.
But when an industry gets secret concessions out of the White House in
return for a promise to lend the industry's support to a key piece of
legislation, we're in big trouble. That's called extortion: An industry is
using its capacity to threaten or prevent legislation as a means of altering
that legislation for its own benefit. And it's doing so at the highest
reaches of our government, in the office of the President.
When the industry support comes with an industry-sponsored ad campaign in
favor of that legislation, the threat to democracy is even greater. Citizens
end up paying for advertisements designed to persuade them that the
legislation is in their interest. In this case, those payments come in the
form of drug prices that will be higher than otherwise, stretching years
into the future.
I don't want to be puritanical about all this. Politics is a rough game in
which means and ends often get mixed and melded. Perhaps the White House
deal with Big Pharma is a necessary step to get anything resembling
universal health insurance. But if that's the case, our democracy is in
terrible shape. How soon until big industries and their Washington lobbyists
have become so politically powerful that secret White House-industry deals
like this are prerequisites to any important legislation? When will it
become standard practice that such deals come with hundreds of millions of
dollars of industry-sponsored TV advertising designed to persuade the public
that the legislation is in the public's interest? (Any Democrats and
progressives who might be reading this should ask themselves how they'll
feel when a Republican White House cuts such deals to advance its own
legislative priorities.)
We're on a precarious road -- and wherever it leads, it's not toward
democracy.
© 2009 Robert Reich
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