SalemNews.com, Salem, MA

October 3, 2013

Watson: Many factors weave into our economic crisis

Brian T. Watson
The Salem News

---- — The ongoing congressional impasse regarding the need to keep the government up and running, and the need to raise the debt ceiling by Oct. 17, illuminates a number of grim economic and political realities.

The very worst of those realities are economic, and their genesis — fortunately, in a way — is not primarily in Republican or Democratic political policies or differences, but in enormous trends and developments within capitalism, finance, technology, trade and the markets themselves.

I say “fortunately” because one necessary precondition for Americans to repair and put together a sustainable economy is to recognize that, for the most part, the current shape of our economy is the result of 40 years’ worth of factors — factors that are the consequence of Republican policy, Democratic policy, lobbyist influence, union and corporate power, automation, computerization, globalization and the widely shared human appetite for material consumption.

I say “fortunately” also because we are in a bad political moment. We are polarized, we are “red” or “blue,” we are “job creators” or slackers, and our Congress is paralyzed. But if we can recognize that the factors I list above are all at work and have been facilitated by or imposed on all of us — regardless of political belief — then we can look for and support those moderate political voices who acknowledge that broad range of factors and who, therefore, seek political approaches and economic reforms that do justice to the complexity of our economic difficulties.

It is just misleading, harmful and vastly oversimplified to identify government spending and policy as the primary cause of our economic duress. Instead, government spending should be seen as one part of an interlocking mosaic of factors.

More than ever, we need political leaders who are rational, reasonable, nonideological and willing to compromise. Here is where it must be said: The current 40 or 50 most ideological of the Republicans in Congress are obstructing the hard, bipartisan work that must be done to address the serious problems facing our government, economy and society.

I believe that most Democrats and most Republicans — as Americans — can together improve our economy, but not if tea party-Limbaugh Republicans continue to persuade mainstream Republicans into dysfunctional positions.

The stakes are very high. For we may have reached a point where the global economy can produce more goods than the global population can purchase. Furthermore, the global economy may be able to produce that excess of goods by using only a portion of the globe’s available labor. If these two possibilities are indeed realities, then the very engine — consumption — of capitalism has become insufficiently large — at least for nations’ economies as presently conceived.

That has definitely become the case in the United States. Large unemployment has reduced consumer demand for goods to some quantity well below the 70 percent of all economic activity that our economy is designed to function well with. What’s worse, the millions of jobs that have left the country are not coming back. And the “productivity gains” achieved by robotization and computerization will continue to eliminate jobs year after year.

Simultaneously, fewer workers are able to send taxes to the government, and so it becomes financially distressed. Public expenditures on Medicare, Medicaid, education and defense then face looming shortfalls.

The solution is not to shut down government or default on its obligations. I read a lot, and widely, but I don’t find many economists or businessmen advocating breaking one of our tools (the government).

The beginning of finding solutions starts with embracing principles — principles that come from mathematics. Since 2009, economists and policy wonks on the right and left have repeatedly stated that some combination of revenue increases (taxes and subsidy cuts) and budget cuts are necessary — mathematically — to make headway against excessive spending and debt.

There are myriad other steps we can try. I just read “Aftershock” by Robert Reich and “Average Is Over” by Tyler Cowen. We label Reich a “liberal” and Cowen a “conservative” (labels are part of enlarging our problems), but they agree that many factors put us where we are today. And they agree on the core principle (revenue plus cuts) above. Both men are smart enough and mature enough not to single out government spending, or globalization, or welfare dependency, or any one thing, as the cause of our crisis.

We had better start understanding our economy for the complex ecology that it is. It contains some balances and equilibriums, but it is not static. It is constantly evolving. It has many powerful, two-way circular aspects, with feedback loops and inputs and symbiotic relationships. Everything in our economy is connected, and there really are no “externalities”. Lastly, government is an integral part of our economy. Break it, and we’ll bring down the rest of the ecology.

Brian T. Watson is a Salem News columnist. Contact him at btwatson20@gmail.com.