The Bogus CrisisJay Mandle - Professor of Economics at Colgate University
Posted: 8/29/11 11:06 AM ET
The debate over the budget deficit illustrates this point with exceptional clarity. As a crisis, the event was entirely bogus. The United States government has experienced absolutely no difficulty in borrowing the money needed to cover its short-fall in revenue relative to expenditures. The interest rate it pays on the loans it requires has been at rock-bottom levels. And if and when it is forced to pay higher rates, it possesses ample scope to raise taxes. In 2009 this country's tax receipts as a percentage of our gross domestic product (GDP) placed it 26th out of the 28 countries belonging to the Organization for Economic Development and Cooperation for which data were available. Only Mexico and Chile ranked lower than we did. United States tax revenues were only 24.0 percent of GDP while the average for all of the countries was 34.1 percent. Sweden topped the list at 46.4 percent.
The deficit debate was manufactured in the service of the political goal of reducing the size of the government and the services it provides to the population. And in that it was hugely successful. The acrimonious Congressional dust-up was not only a distraction from profound problems facing the country. The resulting commitment to a reduced government ensured that we would be incapable of resolving those issues. Mitigating the consequences of global climate change would necessitate a dramatic ramping up of government support for renewable energy. That now is precluded. The same is true concerning the damage caused by our malfunctioning economy. In July of this year, 16.1 percent of the labor force, about 39 million people, were counted by the Bureau of Labor Statistics as un-or under-employed. These people will continue to need government-supplied assistance, but only cutbacks are in the offing. To compare the budget "crisis" to either global climate change or the catastrophe of long-term unemployment (in July almost half of the unemployed has been without work for more than 27 weeks) is just laughable. Yet in our broken political system these real crises were ignored in favor of the fake one.
It is the weakness of the Democrats' push-back to all of this that reveals the real source of our country's political dysfunction. It would be one thing if advocating a minimal role for government were a partisan affair, promoted by small-government ideologues in the Republican Party. But the fact is that the response by Democrats to the conservative's small-government offensive has been tepid at best. By no means have Democrats mounted a robust defense of the public sector as an essential tool in offsetting the multitude of problems created by market failures.
What lies behind this reticence is the fact that the campaign funders of Democrats are, like the funders of Republicans, disproportionately wealthy. And if there is anything that wealthy people in this country agree upon it is that they and their wealth should be left alone. Socially liberal members of the banking community may provide support for some Democrats, but would-be candidates who would reimpose stringent regulations on Wall Street cannot hope to raise enough financial support to mount competitive races. Because this is so, proponents of an activist government are rarely heard. Marginalized in this way, the argument that government needs to offset the excesses of the private sector has been excluded from the country's political agenda.
More:
http://www.huffingtonpost.com/jay-mandle/the-bogus-crisis_b_937808.html:shrug:
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