2011-02-17

US budget,”mostly a done deal”



The revenge of trickle-down economics
President Obama's basic budget for fiscal 2012 is mostly a done deal, supported by the entire political establishment. The hyped choreography of forthcoming battles between Democrats and Republicans is a very secondary sideshow

Both sides agree that the US private economy is in such a poor and dangerous condition that it needs massive fiscal stimulus from the federal budget: classic Keynesian policy. Washington thus plans to spend roughly $3.5tn, while taking in tax revenues of roughly $2tn; hence a deficit of $1.5tn. In the light of such numbers, the debates of Democrats and Republicans over spending cuts likely to be of the order of $40-60bn are inconsequential.

Alltså ett underskott på ca 10% relativt BNP, Borg kan känna sig lite lugnare USA fortsätter att stimulera världsekonomin, handelsunderskottet steg med hela 33% 2010 till 3 214 000 000 000 Kr, 3,2 biljoner. Utan detta hade förstås den svenska exportindustrins återhämtning varit mycket blekare. Men trots storleken är det inte mer än 3,4 % av USA:s BNP. Man kan notera att bladen inkl de som ska föreställa seriösa som t.ex. BBC glömmer bort att ställa det i relation till USA:s BNP utan koncentrerar sig helt på de sensationella i de stora nominella siffrorna. Den svenska obalansen är vanligen långt större än så.

Man kan förstås fråga sig varför stimulanspengar skapade ur tomma intet (fiat-valuta) i USA är värdefullare än om det görs här.
Amerikanska underskott i affärerna med utlandet är inget nytt.

"I Sydostasien - liksom tidigare i Europa och i Mellersta östern - har USA rest en sköld mot aggression (...) Bakom denna sköld skyddas alla de fria människornas och de fria nationernas hem, liv och nationella integritet över hela världen (...) Och om vi i år inte kunnat förbättra vår betalningsbalans så ligger främsta orsaken därtill i valutakostnaden för denna nyss nämnda frihetssköld."
Secretary of the Treasury Henry H. Fowler - 1966



Both sides agree that government spending will continue to follow the old "trickle down" theory, despite its failure to date. Massive federal outlays on the largest banks, insurance companies and selected other large corporations produced a "recovery" for them, but not in the rates of unemployment, home foreclosures and state and local austerity budgets that keep crippling the US economy. Federal largesse has yet to trickle down, but both parties proceed on the assumption that it eventually will. Neither party tallies the economic and social costs of massive unemployment, home loss and state and local austerity budgets. Neither party offers any alternative to "trickle down", as if no alternative exists or is worth debating.

In the 1930s, capitalism's last major global breakdown, then President Roosevelt eventually pursued the alternative "bubble up" theory. Between 1934 and 1940, he created and filled 11m federal jobs with unemployed workers. Their incomes enabled them to maintain mortgage payments and buy goods and services that provided jobs to millions of others and profits to many US businesses. That alternative to trickle-down economics did not suffice to overcome the Great Depression. However, it certainly alleviated more of the economic damage and individual suffering of that breakdown than Bush's and Obama's trickle-down economics have achieved in this one.

Politically, Roosevelt's bubble-up approach won him the greatest outpouring of electoral support ever achieved by any US president.

Of course, the groups immediately affected by specific federal budget cuts will suffer. Democrats will posture as their defenders and, by extension, defenders of the environment, or poor people, or pregnant women, that those groups champion. Republicans will posture as the punishers and reducers of an arrogant, outsized and inefficient state, as well as champions of reduced tax burdens on businesses and people.
No matter what their sideshow yields, however, the basic prognosis for the fiscal 2012 federal budget, combined with the current crisis in state and local budgets, is grim.

Till och med den ihärdige chockdoktrin gurun Jeffrey Sachs är upprörd över budgeten:
Sachs intervjuas hos Blombergs

An irrational economic absurdity
“The Conservative belief that there is some law of nature which prevents men from being employed, that it is ‘rash’ to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years.”
Keynes




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