Tackling Demand and Deficits

"stoke more aggregate demand" (0.00 / 0)

Sounds like you're looking for a new bubble.

Looking at aggregate demand as a way to find solutions to our unemployment problems is not necessarily the best thing to do. There are a lot of other factors that are going to get in the way: companies pushing worker productivity to unheard of levels; high levels of private debt were encouraged by the housing bubble building illusive equity figures, and accompanying unsustainable high levels of consumer spending; outsourcing of major sectors of our economy to oversees production; lack of desire of financial markets to invest in domestic production and innovation; desire of consumers to reduce their level of private debt to more sustainable ones in light of the prolonged recession and unemployment; the fact that the rich are getting richer and the poor getting poorer obscures the fact that the rich spend in their own little sphere--this increases the effect of structural poverty on the lower social classes.

So when I hear people pushing aggregate demand as a solution, even a temporary one, I just hear a push to go back bubble boom-bust economics.

What this country needs is some leadership to transition our economy to one that: is more steady state and egalitarian; is less dependent on foreign energy production and imports; innovates and produces at home its products instead of outsourcing production and support services; leads in technological, industrial, and transit research and design; and recognizes the importance of other forms of economies outside of the keynsian sphere as to their contributions to economic stability.

I call the "stoke more aggregate demand" the coca-cola tv commercial theory of economic revitalization, even if you guys are calling for replacing reductions in private debt (consumers are trying to pay down debt in the face of uncertain economic times instead of spending) by increasing public debt. Relying on an eventual return of pre-Great Recession spending habits to fix our economy is guaranteed to fail.

When people say that long term un and under-employment is going to wreak havoc on our economy long-term, it is partly because those people will come to live a lifestyle more like those who endured the Great Depression did--being more self-reliant, spending less and saving more. making do with a minimum of goo-gaws in their lives. everything that the consumer marketeers (aggregate-demanders) are completely freaked out about. A generation lost to modern consumer marketing. The "I'll drink water, not Pepsi, thank you very much" anti-Pepsi generation. Generation Z is going to be everything that the baby boomers fear most about the economy: a return to depression and post-depression consumer sensibility.

This way is fraught with political peril, and just postpones the inevitable return to uncontrollable boom and bust economic cycles. Our economic situation cries out for leadership and innovative thought to change our direction. Sad that we're not getting, and most likely will not get it.  [/rant]

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by: JC @ Mon Apr 19, 2010 at 17:09:58 PM UTC

Advocating to teansform our economy is another path (0.00 / 0)

I'm not sure what we do at the federal policy level, though. And even with this, we'd still need to stoke aggregate demand on some level. Producing stuff at home only works if people are buying stuff. We can improve people's lives in lots of ways poorly reflected in GDP -- I often think that Missoula does lots of this stuff as well as any city I've ever seen. But the work necessary to do it -- building farmer's markets and growing organizations like MUD, Home Resource, and Garden City Harvest, etc. -- is hard and not driven much by federal policy.

And even in a city like this where there are a lot of amazing opportunities, there is still a huge amount of involvement in the traditional American economy.

So I think you can be completely correct in stating this:

What this country needs is some leadership to transition our economy to one that: is more steady state and egalitarian; is less dependent on foreign energy production and imports; innovates and produces at home its products instead of outsourcing production and support services; leads in technological, industrial, and transit research and design; and recognizes the importance of other forms of economies outside of the keynsian sphere as to their contributions to economic stability.

But I have no idea what that policy means on the ground. I'm also not certain that this needs to be national leadership. I think a lot of this could be local leadership.

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by: Matt Singer @ Mon Apr 19, 2010 at 17:44:17 PM UTC

[ Parent ]

Lot's of things to do at the federal level and policy-wise (0.00 / 0)

First off, stoking the aggregate demand through government intervention--i.e. the stimulus--is a short term proposition meant to offset minor recessions. It has never been tested on a recession this large in modern times to see if it will have the intended effect.  Or if it's use will be long lasting after continued deficit spending becomes politically impossible (which isn't far off).

The local reliance on the sorts of outfits you mention--MUD, Home Resource, Farmers' Markets, and Garden City Harvest (all businesses I've worked with, some extensively, by the way)--is a huge benefit to our community, and model for others to follow. I don't know if you remember, but GCH was built around a major USDA grant that ran for three years, after which the organization had to become self-sustaining, which it has done. The USDA could follow GCH and other like organizations' success and build on it with another round of grants to other communities to follow suit. Except on a much larger scale to encompass many more communities. Home Resource could benefit from a federal policy that would grant tax credits to homeowners that build using reclaimed materials, instead of new ones, much like the Energy Star program. MUD could benefit from federal policies that encourage recycling and reuse of compostables, tax breaks for landowners who allow for community use of land for gardens, etc. Farmer's Markets benefit from federal policies that allow use of EBT cards at point of sale, produce and meat handling outside of traditional retail/wholesale channels. Growers benefit from strong organic labeling and certification processes, strong regulations on GMO and pesticide/herbicide drift.

So the wealth of areas that federal policy can influence out-of-gdp economies is huge. There just has to be some will and leadership to push it along. And for other areas where federal policy could improve would be diverse: for energy production we could set a goal of nuclear fusion by 2020 and devote the financial resources to accomplish it; shift our economy to 1/3 solar, wind and renewable energy sources by 2020 and devote the resources to it; for high speed rail, we could follow China's lead and say we'll link up and down the east and west seaboards, and connect with Chicago from the east; for NASA we could say we'll put a man on Mars by 2025, instead of the vague notion of somebody somewhere after 2030; with broadband technology it could be replacing most copper with fiber in 10 years;for computer and electronics, it could be returning manufacturing capacity to the U.S. via trade agreements and tariffs; for agriculture it could be ending subsidies for corporate farming, and encouraging smaller, more diverse and self-sustaining farms; for forests it could be ending subsidies to build roads and log roadless areas by encouraging (read "incentivize") rational land use and housing policies and construction technology; on and on ad infinitum. The federal government has the power to shape our future economy through its use incentives and disincentives. Our current economy is highly reflective of all the policies that have directed its growth.

Matt, there is a huge realm of possibilities that are available if the government is just willing to adjust its use of incentives and disincentives. if it is just willing to set some goals that the public is willing to fight for. Think about the Transcontinental Railroad, Eisenhower and the Interstate system, Kennedy and the Moon program.

Now is a time for visionary leadership, not platitudes about returning to the good ole days of petty consumerism, which is what I hear with the pushes to maintain aggregate demand in lieu of transformative economics, and the recognition and furthering of, policies that move this country to a more self-sustaining and egalitarian economy.

When you say it takes local leadership, of course it does. But that local leadership excels in the nonprofit sector when it can partner with the state or federal government, as it did with GCH, for instance. Without government assistance, GCH would not have succeeded, or if it did, it would be a much different business than it is now. And of course, local leadership in the private sector can do amazing things, sometimes moreso with government incentives.

Want another idea? Cut earmarks by 50% and use the saved money to return to local communities in the form of a block grant they can administer as an incubator for out-of-gdp, sustainable, and transformative businesses.  

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by: JC @ Mon Apr 19, 2010 at 18:55:18 PM UTC

[ Parent ]

Thanks JC (0.00 / 0)

Your comments are right on!  It is way past time for true progressives to push for economic and environmental sustainability and an end to the current economic model that relies on over-consumption and over-development...only to crash and burn every 10 to 20 years.

Matt S also stated, "concerns over the short-term deficit are overhyped"...Really? Overhyped? I mean, what indication is there that this will be a "short-term" deficit anyway? Seems like a lot more is going to be going out, than coming in, for a long, long, long time.

Time for a sustainability filter?

http://cleangreensustainable.w...

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by: Matthew Koehler @ Tue Apr 20, 2010 at 13:29:53 PM UTC

[ Parent ]

Huh? (0.00 / 0)

On Feb 1st,2010, The Great Leader, The Messiah, The Anointed one, President Obama presented a 3.83 Trillion dollar budget, and the deficit in it was 1.56 trillion dollars, and you think that somehow, some way you can spin this into a good thing? Then tack on another trillion for Obamacare?

And you're accusing the GOP of being hypocrits?

President Bush was no fiscal conservative, signing spending bills as fast as Congress could pass them, but never even close to spending half as much as President Obama!

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by: Eric Coobs @ Mon Apr 19, 2010 at 22:27:10 PM UTC

Just a suggestion, Eric (0.00 / 0)

Someone running for an office as menial as Clerk and Recorder, which many think should be bipartisan by nature, probably shouldn't be making such a partisan ass of himself online.

Just tryin' to help.

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by: Rob Kailey @ Mon Apr 19, 2010 at 23:26:39 PM UTC

[ Parent ]

Really? (0.00 / 0)

Matt's running for an office? LOL

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by: Eric Coobs @ Mon Apr 19, 2010 at 23:28:09 PM UTC

[ Parent ]

Then ... Good Luck N/T (0.00 / 0)

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by: Rob Kailey @ Mon Apr 19, 2010 at 23:44:03 PM UTC

[ Parent ]