Grace Ross: Policies That Build Economies and Those That Destroy Them
Tuesday, May 14, 2013
So here are the simple guidelines that I have come to understand in recent years in trying to assess these policies. The real litmus test for policy should be whether it is continuing to further undermine our economy and perhaps most importantly, our precious democracy. This is what I use to assess what is thrown at us as supposed policy debate among elected officials.
(The greatest block to making sense of all of the conversation is that we keep getting told that it’s about “the two sides”: The Conservatives against Liberals/Progressives or Republicans versus Democrats. Honestly, neither side has clean hands on these issues. It doesn’t matter whether pundits or electeds are Democrat or Republican; listen to what they say and then do… In fact, making this into some big partisan boogie monster is like the ultimate game of “look over there”; that way, we avoid looking at the real problems.)
Guidelines. For an economy to do well – and this is true from 60 years of research of developing economies and more recently the supposedly first world economies: if the general population does not make enough money to consume the products produced in that economy then production dies off, the jobs connected to the production die off and the economy itself grinds to a halt.
The recent and, in fact, ongoing and slightly worsening economic situation that the vast majority – literally over 90% of the people of the United States – underscores this reality.
The vast majority of us have been losing spending power now through two supposed economic upturns (not counting the present one which is clearly only an upturn for the very, very wealthiest). Our buying power has really dropped off. We are having problems keeping a roof over our heads and food on the table; it means that we simply do not have money to spend, the life-blood of an economy.
When the 9-11 plane crashes happened, the political leadership of our country did not really debate what would be an appropriate military response; they spent an enormous amount of time trying to convince the people of the United States to keep spending. A weak economy is one of the most dangerous challenges to the survival of a country.
The critical economic question is: are the policy choices helping to ensure the broad-based ability of the vast majority of people to participate in the economy? We improve their ability to participate in the economy with better and better paying jobs and enough jobs to go around, proper supplemental income for those who can’t find jobs. Those incomes need to keep pace or, better, surpass the rate of inflation. That is the measure of successful economic policy.
The only policy issue publicly debated now that could be considered directly related is the government costs to having people unemployed. When unemployed, they draw on other government financial systems. However, all of those programs combined are small compared to our investment in the military and significantly less compared to the amount of tax breaks and tax loopholes out there. All of these are overwhelmingly dwarfed by the $7.7 trillion that went to the financial industry. Those government supports are almost irrelevant to compared to what gets skipped: unemployment causing a lowering of the incomes of regular people.
The second impact of our general loss of income, however, is that as an economy becomes tipped more and more towards a very few having the vast majority of financial resources, that income & wealth divide also undermines a democracy. The government no longer represents the interests of regular people, of the majority; our leaders seem almost no to talk to us any more.
The present, most egregious example of this is (what must have been purposely named to obscure debate) the “chained CPI [consumer price index]”.
The first signal that this is bad policy is that it has not been described in a way that any voter could possibly understand; that reality directly undermines our ability to participate in our government. Also, it is not being picked up by advocacy organizations that should be responsible for these issues such as the American Association of Retired Persons. It is agreed that those on social security would be profoundly and badly impacted if a chained CPI is put in place; the AARP is relatively silent.
The second thing is that a chained CPI does not just impact social security.
Part of the dishonesty of the discussion here is that changing the consumer price index – the common measure of inflation – had already occurred under Clinton, (yes, a Democrat) in such a way that we don’t have an accurate perception of inflation at all at this point. It was up around over 12% when the market crashed; yet the official statistics put it well within the margin.
Why? Because no one in the leadership of either party wants to be responsible for explaining why we have runaway inflation especially when our economy is bogging down and we’re in fact in deep financial trouble.
The CPI impacts a vast number of other income programs and job payscales. Huge sectors tie cost of living increases like in union contracts and big business salary increases, to the consumer price index. Not only will this harm those on social security (who shouldn’t even be part of the budget debates as social security is separate from the federal budget) but will harm the income of huge sectors of our population for many years to come.
Changing the CPI also dumbs down the real political debate. We deserve as people impacted in a million ways by inflation to have an accurate measure. A measure that claims to but does not measure inflation thus undergirds a system of political lies that destroy our ability to debate real issues. The dangerous impacts of this proposed change gets buried under supposed partisan differences. We are supposed to care about those differences instead of the loss of accurate information from our government that affects all aspects of our economic life.
Inflation is no longer inflation. Unemployment is no longer unemployment. Homelessness is no longer homelessness.
Even food stamps, the proven best national stimulus program are not even discussed for their ability to buy food (all they can legally be used for). Instead, they become about fraud and misuse when the real fraud is the transfer of trillions of dollars underwritten by the good faith and credit of the taxpayers of the United States to megabanks. And for what? For mortgages that were often illegally written and the financial institutions that are still being bailed out when the rest of us do not even know what we can rely on as an economic future or real democracy.
Perhaps, there is hope if honesty about economic realities can break through. As the most recent economic theory supporting austerity has been shown to have been based on data errors, even the austerity advocates are changing their tune. Bill Gross, the manager of the world’s largest bond fund basically switched sides in an interview with the Financial Times on Monday:
The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You’ve got to spend money. Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out — even if a country can print its own currency and write its own checks.
Try the economic test I have learned and see if it clarifies.
Grace Ross is a former Gubernatorial candidate and author of Main St. Smarts.
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