Darrell Delamaide argues that President Obama must stimulate the U.S. economy sufficiently to boost employment figures in the near-term, otherwise Democrats will court a political disaster next year. However, the idea of America is far more consequential than today’s interest group driven party goals. In reality, Delamaide is not arguing for stimulus as much as he is arguing against the GOP. A better argument is to replace both reckless, feckless political parties and get the nation’s budgetary affairs in order.
Granted, replacing both political parties is not currently achievable. But if President Obama is correct that we now have a trillion dollar structural deficit, it won’t be many years until crisis intensifies, with neither major party remaining viable. Why work to preserve parties that are destined by their errors to die? Both parties are married to deficit spending. They are not worthy of continued existence. Run off the unworthy stewards and birth new parties with praiseworthy platforms and clear-thinking people.
Delamaide, Paul Krugman and others in the “deficits-don’t-matter-much” camp apparently fail to realize that deficits can “go atomic” before leaders understand what is happening. Take for example the credit crisis of 2008. Few economists foresaw it developing so rapidly and extensively. Few financial gurus anticipated debt markets being shuttered in a period of mere weeks. When bidders withdraw, even moderate amounts of debt can serve as a hangman’s noose when the time comes to roll debt forward.
The issue is not the size of the current federal deficit or national debt relative to GDP or any other standard benchmark such as national wealth. Debt to income measurements can deceive people into a false security, especially when a nation has experienced similar ratios during previous periods (e.g., WWII). The real issue is the possibility of the debt’s financiers — including many foreigners in our current experience — losing faith in U.S. politicians, dollars, taxpayers and our integrity. Financing our fiscal policy with foreign debt leaves us little control of our destiny, especially when our debt turns over (on average) about three times a decade.
Our big hazard is not the one Paul Krugman proposes in his Nov. 23 NY Times op-ed piece; namely, ‘the risk to recovery from inadequate government efforts to stimulate the economy.’ The real risk this nation faces is the prospect of someday bargaining away congressional control of the American economy to entice foreign credit providers to remain bidders for U.S. debt.
The early American patriot Patrick Henry is credited with saying, “Give me liberty or give me death.” Nowadays, our political leaders proclaim to our trading partners, ‘Give us credit or it will be our death.’ So, what will we do as a nation when foreign central banks dig in their heels for some hard bargaining and say, “Give us your economic liberty or we will not finance your debt!” Just how much good will our atomic weapons do then? Will we threaten to nuke China and Saudi Arabia if they don’t keep loaning us money?
Here’s what we’ll do: We’ll blink! We’ll tremble when Wall Street elites short the Dow and make it drop a few thousand points in a day or two. A substitute Hank Paulson will threaten the U.S. Congress with the end of the economic world — 20% unemployment and politicians thrown out of office. Legislators will respond by standing on their soap boxes only to turn tail and bow the knee — quite like they did in 2008. Our celebrity legislators will sell our national birthright because they know nothing else.
The American people have the power to take the U.S. House of Representatives and stand it on its head every two years. So, why don’t we! Why not repopulate the U.S. Congress on both sides of the aisle?
In 1977 the U.S. Congress gave to the Federal Reserve a ‘dual-mandate’ for full employment and price stability. Almost immediately, the Congress turned its back on its responsibility, failing to monitor the Fed’s implementation of the mandate. Acting with duplicity, the Fed moved stealthily on the premise that full employment is not possible without economic growth, and economic growth is best assisted by steady inflation — incremental inflation that when compounded rots the worth of worker pay increases. The Fed tacitly defined “price stability” as a CPI under 4%, then unleashed arguments about the price stability mandate having little relationship to paper asset inflation. In this way the Fed sanctified policy to accentuate differentiated wealth gains on behalf of the Wall Street rich.
The U.S. Congress can still change the Fed’s mandate. As important as it is to audit the Fed, it is even more important to revise its mandate to a directive requiring the Fed to establish and maintain socially just policy that works to narrow the wealth gap between the American middle class and elites. Furthermore, the mandate should require the Fed to choose policy that works to secure the long-term economic autonomy of the United States by reducing risks to foreign blackmail. Indeed, a requirement should insure that productive enterprise — especially ecologically sustainable enterprise — receives preferential access to the money supply relative to Wall Street’s exploitative access. Additionally, we should require true price stability across consumer products and paper assets, not pseudo-stability that erodes the dollar in mere decades. Ultimately, the Fed should be held accountable to strictures in the U.S. Constitution.
Why audit the Fed if we don’t understand what the Fed should do? Happily, it is possible to audit the Fed, revise its mandate, alter its ownership, and make it serve the constructive ends for which central banks should exist. The best way to do this is analogous to replacing a credit card that has been stolen. Arrange with the card issuer to have fraudulent charges removed. Then, roll forward the legitimate charges onto a replacement card. Replace the stolen Federal Reserve with a legitimate, constitutionally controlled central bank.
Do deficit doves in high places fail to see the approaching day when control of the Fed by the U.S. Congress is handed off to global powers? Probably not. They see the day quite clearly and wish to hasten its approach — but they keep their words discreet. They dissemble. Since all public policy is dependent upon the appropriations process, control of public policy is relinquished when control of economic autonomy is forfeited. Regardless of the rhetoric, Paul Krugman and the ‘stimulate now, pay later’ camp advocate a dangerous brand of elite-driven globalism — not American autonomy and not sustainable world peace.
Amazingly, our country is making 21st century mistakes as serious as ones leading up to our Civil War. Where are the large cuts to the federal deficit that Obama promised six months ago? The $500 billion structural deficit of a few years ago is now a trillion dollar structural deficit. We are as addicted to debt now as this nation was trapped by slavery back then. In both cases the subsidy of injustice is unsustainable. In both cases the redemption payment will be profound. In both cases President Lincoln’s words in his second Inaugural Address will ring true: “Woe unto the world because of offenses.”
Many Southerners loathed the institution of slavery in the years before the Civil War. But their loathing was less intense than their fear of losing the economic subsidy that slavery provided to their economy. Sadly, establishment thinking today is no more moral or wise than in the 19th century. Elites are lashed to an unsustainable system and cannot get off without damage to paper asset values and a reduction in their power. They sail on but will not bring their ships safely to shore.
When all is complete Wall Street will look like burned out parts of the South after the Civil War. What a bittersweet prospect to be sure! Happily, the replacement for Wall Street — like the eventual replacement for our central bank — will be built with people of scrupled character and upon sound law. There will be new opportunity, fresh justice, sustainable thinking and global friendship that makes for satisfying life.
Just the thought of such deliverance is enough to make one merry as the holidays approach. So toast “true hope” and put an extra slice of turkey on your plate. Be thankful for the goodness that does exist in so many quarters and in so many magnificent people! There is ample evidence that the Universal Sovereign has not forgotten this planet and the millions of people worldwide who think and act like his offspring.