Friday, March 22, 2013

The great growing machine...

Here's an excerpt from Harold Meyerson's Washington Post Op-Ed this morning:
In short, the economy is working for our economic elites. The massive changes they would have to make to investment strategies and the division of corporate revenue so that the economy worked for the majority of the American people are nowhere on the horizon. The great growth machine that once was the U.S. private sector ain’t what it used to be — which is one reason each recession since 1990 has been longer, deeper and more in­trac­table than the last. That’s the new economic reality in this country, and that’s what the budget of the Congressional Progressive Caucus responds to. It’s not that liberals have been prompted to move leftward through the readings of ancient socialist gospels or by smoking some stash left over from the ’60s. It’s that the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference. If anyone is smoking something, it is conservatives who foresee a rebirth of prosperity if only the private sector is left alone.

Here's my take:

The great growing machine that is the U.S. public sector ain't what it used to be either. It has morphed into a leviathan that rains down (its influence) upon the U.S. economy like never before --- which is the reason each recession since 1990 has been longer, deeper and more intractable than the last. That's the new economic reality in this country. The politician, and his advisors (reared in the politically-expedient Keynesian school of economics) know no other strategy than to throw money at problems created by throwing money at problems.

I'm hoping against hope that it's not only conservatives who understand that a rebirth of prosperity is only possible to the extent the private sector is left alone. I'm hoping that people will come to understand what corporate execs understand; that, cronyism notwithstanding, the more government intervenes into the private sector the more distorted the pricing of goods and services, and the more difficult/uncertain the forward planning---which breeds apprehension, which results in record cash on balance sheets and a strong reluctance to invest/expand/hire. Remember, if you're old enough, the gas lines in the '70s. Remember, you are old enough, the real estate bubble in the 2000s. Remember the rise, then crash, of auto sales that coincided with "Cash for Clunkers". Remember the rise, then crash, of home sales that coincided with the "Homebuyers Tax Credit". Pay attention to the education/student loan bubble we're currently experiencing. Pay attention to the Fed's pricing of today's bond market. I could write volumes on where government price-fixing, of whatever mode, has produced unsavory results.

Here's another snippet from Mr. Meyerson's article:
The U.S. corporations that make up the Standard & Poor’s index of the 500 largest publicly traded companies get almost half their revenue from sales abroad, according to a 2011 S&P analysis, and, despite all the hoopla about bringing manufacturing back to the States, much of their production is going to remain abroad. The rise of machines has, we all know, taken its toll on employment too. U.S. corporations are sitting on $1.7?trillion in cash, with share values and profits that render most of these businesses’ leaders happy campers. Even if the U.S. economy continues to fall far short of full employment, and even if the rate of workforce participation continues to decline, these businesses can still sell their products all over the world. Unlike in the 1930s, the shortfall in domestic consumption does not present them with a crisis but with perhaps nothing worse than a missed opportunity.

Here's my take:

Mr. Meyerson, like so many surface dwellers, suffers from extreme Neo-Luddism, and a most pernicious affliction called protectionism. The "rise of machines", from automobiles to computers, and the expansion into world markets have been nothing short of miraculous in terms of job growth in this country. To imagine a world where we couldn't reach across borders and/or where we didn't aggressively exploit innovation wherever we can create it, is to imagine a world of utter stagnation.

Oh, by the way, I typed this essay on the iPad I bought at the bustling, heavily staffed with U.S. workers, Best Buy store because of the wait at the bustling, heavily staffed with U.S workers, Apple Store was too long due to customers cramming in to spend their wages on affordable (thanks to Apple's international reach) technology. And that's just the tip of the iceberg when we consider the economic, right here at home, benefits resulting from all the stuff the consumer can do with that technology.

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