What Price Truth?

This from Mark McKinnon of the Daily Beast, "Make no mistake, this collapse of economic confidence is not an independent event driven only by economic reality. This sharp drop in consumer confidence is a direct consequence of the lack of confidence in our political system and its leaders." 

Instead of the 60,000 jobs we expected, we got zero in August.  Is there any question that the main topic of the political debate should be “more jobs”?  I don’t think so.  Because that issue will be lost in the “blame game”.  And that only conceals the reality we face.  What I’m saying is that our political system doesn’t reward politicians for telling the truth.  And we cannot solve our economic problems unless we see the truth clearly. 

Let’s review.  1) We have been on a credit binge since we became convinced that happiness could only be found in consumption.  If we just have more, bigger, better we will be happy.  The good news was:  We had enough credit to buy what we wanted.  2) Then the bad news:  The real estate market bubble burst and our easy credit dried up.  People could no longer use the equity in their homes like ATM machines.  3) The banking system nearly collapsed.  The banks who begged you to borrow money, stopped loaning to anyone.  By this time, we had pre-consumed as much as 30 percent of our annual GDP, leaving a gaping hole in consumer demand.  4) American corporations are now global corporations so don’t live or die on profits made in the U.S.  And they don’t like paying a 38.5 percent tax on repatriated money.  So much of those profits stay off-shore.  5) The mega-rich don’t invest in job producing projects. Instead they put their money in financial investments.  6) The government has decided that we need to cut deficit spending.  This strategy will cause even more job losses resulting in less consumer demand.  Less consumer demand equals fewer jobs.  Fewer jobs equals less consumer demand.  6) Because of the loss of consumer confidence, even those people with jobs are holding back, which results in even less demand.  Which means even fewer jobs.  The result: We’re caught in a vicious cycle. 

We seem to have two options:  1) accept the fact that we will suffer an anemic economy  for an entire generation regardless of who’s in office.  2) break the cycle. 

If we choose to break the cycle, there is only one entity that can do it:  The government!  The Fed is keeping interest rates between zero and two percent.  What else can government do other than borrow money at these low interest rates and stimulate the economy by putting people back to work?  Why borrow?  The drop in tax revenues from an anemic economy makes it necessary. 

So what’s the problem?  The problem is that deficit spending has become a political issue.  The debt limit has been raised 74 times since Reagan without a hiccup.  Now it is being used as a political football in a zero sum game.  This game has no winners.  Unless your definition of winning consists of maintaining or gaining political ground. 

President Obama could have avoided this debt crisis by invoking the 14^th amendment in the Constitution.  He didn’t.  Why?  The Republican house could have gotten a deal without the brinksmanship and obstructionism.  They didn’t.  Why?  The answer simply put:  Politics!  They were both trying to pin the problem on the other.

Our politics are so toxic that we not only fail to fix problems, we make them worse.  The voters are not innocent.  We’re settling for affirmation instead of information.  We want politicians to affirm what we already believe.  And the politicians on both sides of the aisle are happy to do it.  The obvious cost is your vote.  The not so obvious cost is the truth.  Expensive thing; the truth.

Robert DeFilippis