Monday Editorial: The Economy

This past week has highlighted the American economy in relationship to the coming election. I would not presume to speak with great authority on such matters. In the past, I have preferred Republicans in office to Democrats when it comes to the economy. I am sympathetic to the idea that Bush's first stimulus package had much as anything to do with pulling us out of the economic nose dive we were in when he took office. But I have no expertise to say so.

I attribute our current economic crisis (again, these are my hunches as a complete amateur) to:

1. The War in Iraq
On this one I feel confident. The Iraq War has cost us outrageous amounts that we have borrowed from the Chinese and others. I blame this war as a major cause of our economic crisis.

2. The Runaway oil situation
I do not at all buy the arguments (I haven't heard them lately) that gas prices are simply a matter of supply and demand. I blame investors in oil who have driven up the price of a barrel to their current levels.

3. Vast Deregulation
This is just a hunch, but I think we will find (and I assume the experts already know) that the Bush administration has taken a real libertarian approach to business, vast laissez-faire on the market. I'm not saying they began this approach, but I suspect they've taken it to new levels. I have great suspicion that they have not controlled capitalism the way it has to be controlled to keep Marx's predictions from coming true.

I am a capitalist, not a socialist by any means. But capitalism must be carefully controlled if it is to achieve the purposes that Adam Smith intended it to have. Even John Stuart Mills recognized this in the second generation of capitalists. Smith simply can't be carried forward to a global economy, even a contemporary national one, without taking on board the lessons of the nineteenth century. The key is as little government control as necessary to allow for true competition in relation to goods and services. This blind short selling stuff, on the other hand, does more harm than good, it seems to me.

4. The Easy way out
Here I am really out of my depth, but I suspect that Greenspan and the government might have been a little too soft on bailing people and businesses out for bad decisions. I am not opposed to some of this--I am not for the "let the economy crash; it will eventually right itself" approach. But I wonder if they have played with the interest rates just a little too much, created an environment where taking risks was, well, not risky enough.

5. Republican Entanglements
It is here where the candidates start coming into view. We're in Iraq. I imagine we will get out about the same similarly no matter who is elected because the Iraqis themselves are setting up a timeline for us. So perhaps our economic drain here will diminish some in coming years, although it may just shift back to Afghanistan (where it should have been all along).

Oil is going to be a problem until we aren't using it any more, even if we start drilling immediately everywhere. My strong hunch is that Obama would move faster away from oil than McCain, so I've already given Obama the energy vote.

On deregulation and speculation, it seems to me that a Republican president will have a really hard time going in a different direction than Bush has gone. Here is where I get to Republican entanglements. It makes no sense to me, for example, that oil companies be given massive tax exemptions with all the money they're making. It makes no sense to me to perpetuate Bush's tax cuts on the wealthiest Americans.

These were all tax benefits implemented by the Bush administration that weren't there before. I can see the argument of not taxing small business owners, but the people in the above paragraph are big business owners. I do know some people who earn in the 250,000-500,000 dollar a year range who are so in debt that they might struggle under Obama.

All of that is to say that I find Obama's proposed tax on the upper 5% of the population (much of which is a return to pre-Bush levels) reasonable in order to work on some aspects of American society that have suffered under the Bush administration--like education and social services. I am not for simply handing out money to the impoverished. Roosevelt's initiatives like the WPA created jobs for the poor. So the goal should be to get people working, go to them, empower them, rather than to pump money into the black hole of poverty.

I firmly believe that there are some people out there who are smart enough that, if they really wanted to and if the powers that be didn't get in the way, they could devise healthy systems for empowering those who are in a cycle of poverty and to enable health care for everybody in a way much better than what both those with and without have now. I believe we don't have this now because those who have the power to make it so don't want it so.

In terms of the election, my sense of who to vote for here is uncertain, although I think it leans Obama. I seem remember McCain making some comment in the primary season about not knowing much about economic theory. A week ago today he said that the fundamentals of the American economy remain sound but last night they were talking Depression--not even recession. I fear that McCain will simply appoint the same type of people in this area that Bush has--and thus that whatever the causes of our current crisis, they will simply be perpetuated. I suspect that any hope for change in this area would more come from Obama.

I'm sure some of you out there know a whole lot more about these issues than I do, so I now open up the floor for discussion.