Getting it backwards It's jobs, stupid, not the deficit
Buell, John
John Buell GETTING IT BACKWARDS Why balancing the budget isn't enough In the midst of a fiercely contested presidential election, too little attention has been devoted to a pivotal conviction...
...corporations in the 1980s went for leveraged buyouts, mergers, and acquisitions...
...Most citizens know that some federal programs have been sound and effective...
...Businesses also distinguish between operating and capital budgets...
...We emerged from this earlier "binge of debt" as the world's strongest economic power...
...Few businesses ever grew rich without a market of well-paid and well-treated worker/consumers...
...Jeff Faux of the Economic Policy Institute reports that if the U. S. Treasury distinguished between operating and capital expenditures, our current deficit would shrink by about $140 billion...
...It is unreasonable to expect a business immediately to pay off the cost of a new lathe intended to last at least a decade...
...Speaker Gingrich, Dick Armey, and other leading congressional Republicans are fond of a quip to the effect that: "A poor person never gave anyone a job...
...University of California-Riverside economist Robert "Pollin has shown that economic growth in the big-spending 1945-80 era was far faster than during the years of limited government and small debts, 1875-1929...
...Conservatives are right about one thing: Government spending doesn't buy as much prosperity or social peace as it once did...
...Even before the tragic climax of that era, the Great Depression, bouts of unemployment were frequent and crushing...
...During the post-World War II period, government taxes and job creation modulated the typical capitalist business cycles...
...Actions speak louder than words...
...Indeed, as the size and productivity of the business grow, so does its debt...
...The spillover effect that occurs when newly hired workers spend their income and create other high-paying jobs is, however, no longer as strong as it was in the fifties and sixties...
...In many of our competitor nations, unions and the public are much more diligent in insisting that private profits, and public revenues go to productive social uses...
...Recently, both business and government have been taking lessons from the foolish families...
...Government could be hamstrung with growing debts and interest payments-increasingly to foreign banks...
...Think long-term...
...Some perspective on the size and origin of the problem might be useful...
...However, in the Arcadian past celebrated by House Speaker Newt Gingrich, business profits were not automatically reinvested in new facilities, and worker income and consumer power did not always keep pace with growing productivity...
...Following the worst business practices, government seeks short-term leverage rather than the more enduring sources of security in a technologically evolving world...
...He is author o/Democracy by Other Means: The Politics of Work, Leisure, and Environment (Illinois University Press...
...Nonetheless, before everyone becomes inured to the homely verities about the cruelties debt imposes on our grandchildren, I would like to offer four bits of folk wisdom: . Look before you leap...
...With wages being depressed everywhere by the mobility of business and attacks on unions, even sensibly targeted federal investments no longer create the spirals of productivity and job growth they once fostered...
...The significance of any debt lies in its relationship to capacity to pay.[The current national debt is still a far smaller fraction of our total economy than it was in the late forties...
...Short-term corporate profits grow, but the distribution of income becomes more unequal...
...John Buell ;'s a political economist living in Southwest Harbor, Maine...
...The candidates differ only in their appraisals of their opponent's willingness to take the hard steps needed to attain this widely valued goal...
...Our workers today buy many goods made by poorly paid Mexicans working in modern branch plants that U.S...
...The real problem, however, is corporate trade and labor policies...
...Competition with these exploited workers gradually undermines our unions and depresses our wages...
...They have it all backwards...
...Misguided private and public investments and inequitable trade and labor policies could eventually make the worst scenarios of Clinton, Dole, Gingrich, Armey, and Gramm come true...
...Nearly 80 percent of the funds borrowed by U.S...
...Meat-ax approaches to social spending and the deficit will only make things worse by starving our economy of needed long-term investments...
...corporations established to evade domestic labor standards...
...But we would have Clinton and Gingrich to blame...
...Our dollar could sag further in value, eroding our economic security...
...Business leaders preach the virtues of fiscal austerity, but most businesses borrow money in order to expand...
...The recent growth of debt in proportion to the size of our economy is a symptom of deeper problems inherited from trade policies and investment priorities...
...Most families have debt...
...These trends augur poorly for all of us, for, just as during the nineteenth century, sluggish wages and weak unions mean slow growth in consumer spending...
...With fair and equal rules, trade benefits everyone...
...They attribute another 20 percent to union weakness, itself fostered in part by competition with exploited, nonunion foreign labor...
...Government itself spends more on the military in real terms than in 1980 and far less on basic energy research...
...Government debt as a percent of our total national wealth has grown dramatically in recent years-but without typical gains in employment and productivity...
...Our debt grows in proportion to our GNP and our dollar starts to lose value...
...Work by economists Richard Freeman and Lawrence Katz attribute as much as 40 percent of the recent growth in inequality to trade-related problems...
...So also do most political magazines, both left and right...
...Both assume that if the federal government can only balance its books, our economic salvation will be assured...
...John Buell GETTING IT BACKWARDS Why balancing the budget isn't enough In the midst of a fiercely contested presidential election, too little attention has been devoted to a pivotal conviction shared by both major-party candidates...
...Only prudent and timely social investment, along with support for worker rights both at home and abroad, can assure those markets...
...These costly moves improved short-term profitability and market power but did relatively little to create jobs or increase productivity...
...When purchases start to lag behind productive capacity, even the low interest rates that balanced budgets are supposed to bring won't induce businesses to invest in new technologies...
...Foolish families borrow for Florida vacations...
...Even this Democratic president, however, has become a born-again budget balancer, thereby undercutting much of the public will to preserve even those social initiatives citizens have long respected...
...When our government makes social investments during slack times, it still directly creates some good jobs in this coun-try...
...Today, however, Clinton and Gingrich have agreed to grant Mexican-based firms entry to our market even though the Mexican government refuses to create jobs for its own unemployed, enact realistic minimum-wage laws, or protect its workers against corporate abuse...
...If you're so smart, why aren't you rich...
...The smart ones borrow to send kids to college or to buy a home...
...The near universal belief that we are going broke helps explain much of the public confusion over such valued domestic programs as Medicare...
Vol. 123 • October 1996 • No. 18
