Friday, November 5, 2010

What The Swing Really Means

For the last two years, the right wing never acknowledged that the Democrats had won a series of truly resounding victories in Congressional and Senatorial elections, a creeping tide that crested in 2008. Indeed, the right seemed to repudiate fair and square elections using terms like "ramrodding" and "oppressive majority" to describe the Democratic uber majority's enacting of historical legislation.

Now, of course, the Republicans want everyone to acknowledge their own resounding victory this past Tuesday. But face it folks, a majority of 5 in the House, given how polarized the country is, would have been as good as the bloated one handed to the right wing. Having a 20 seat majority is meaningless in terms of putting the country - and world - on a firm economic growth trajectory.

The right wing seems to have immediately forgotten that they are in the minority in the Senate and do not occupy the White House. The House still has to reckon with the Senate and the veto power of the President, should the Senate falter in fear.

Leaving aside that logistical problem, the Republicans cannot rise to the occasion because their DNA will prohibit them from doing so.

This is my hunch. Given the ideological nature of both the Republican leadership and rank and file, I believe they will not be able to address the joblessness/growth problem, because, once facts are faced, the economic philosophy that needs to be utilized is a Keynesean model and not the tired supply side economics of Milton Friedman. The Keynesean approach was used, albeit timidly, during the short "summer" when Democrats owned the whole farm. But really, where $3 trillion in stimulus was needed, less than $500 billion was tossed into the hopper.

Let's say that all the current Republican proposals that are in the wind are enacted. Let the Bush tax cuts stand as they are today. Allow the health care reform to go unfunded or underfunded. (A Constitutional crisis in the making.) Cut out all earmark spending. (It accounts for between 1 and 2% of all Federal spending.) Trim entitlements or growth of entitlements by 10%. Even trimming the sacrosanct defense budget by 10% would only account for $80 billion per year.

[A further aside on earmarks: since 2006, while Democrats have controlled Congress, earmark expenditures have fallen by 40%. That is down off the high of $29.5 billion under the Republicans of the previous Congress. Do the math. Let's say we cut out ALL of the remaining $18 billion in earmarks. Over ten years that would equal $180 billion to be put against a debt of $12 trillion or thereabouts. Keep in mind that many earmarks - while often portrayed as a part of a tale told by an idiot, full of sound and fury, signifying nothing - are directed to positive, necessary projects like safer drinking water systems, school construction, and rail and road improvements. Many earmarks are also part of the defense budget structure.]

It is clear that we cannot budget cut our way out of the Great Recession. This is neither ideological nor pedantic. Cutting roughly $250 billion per year from the budget would return less than the stimulus plan and it is a proven axiom that budget cuts, especially in times of recession, have about a $1.03 return on the dollar. Infrastructure spending, by contrast, returns over $1.60 on the dollar.

This is why a move like New Jersey Governor Christie's shut down of the second rail tunnel to Manhattan will prove to be so deleterious to the economy. 6,000 highly-skilled construction jobs were immediately lost. All of the service and maintenance jobs that would have been created because of the increased rail traffic are now lost. A further 70,000 jobs will not be created in all the various economic sectors in which New York and New Jersey have so long partnered: finance, tourism, retail, law, advertising. New Jersey's roads, already the most crowded in the country, will witness even more gridlock, wasted gasoline, increased pollution, and wasted time by the 45,000 commuters who would have availed themselves of the easier travel. On top of this, New Jersey will have to pay back $315 million already spent on the project.

Contrast this, as I have done before on this blog, with the building of the Erie Canal in the second and third decades of the 19th century. It was built entirely by the State of New York through public financing. In today's dollars, the canal would cost $125 billion. Christie's tunnel to nowhere would have cost about $10 billion. Just a quick reflection on that contrast reminds us of why we hold the early founders of prosperity in such high esteem. They had vision and guts.Christie has the gut part down, anyway.

We can be the world's leader in alternative energy products and generation. We can be the world's leader in high speed Internet access. We can be the world's leader in rail transportation of both goods and people. We can be the leader in clean automobiles and smart automobiles that practically drive themselves. We can be the world's leader in many, many fields, some that haven't even been imagined yet.

But, like the building of the Interstate Highway System over the past 60 years, it will take government leadership and business's willing participation.

Republicans have no plan to be the leaders of anything, except in keeping the struggling down, sending the super rich to even higher wealth accumulation levels, and ruining the American future.

While we need to acknowledge that Democrats have scarcely been better during the current crisis, we need to understand that at least the leftist, Keynesean economic model is the one that has far greater potential to take us into a better tomorrow. Plant the seeds now, reap the benefits later.

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