The world economy is poised on the edge of an abyss. The US economy is mired in a Great Recession, the most negative and dangerous economic downturn in our nation’s history second only to the Great Depression of the 1930's.
What do we do about it? How do we get out of this Great Recession? How do we get back on a course of upward growth and prosperity for all? It seems to me there are common sense options. We can as a nation, and a government, do things that have worked in the past (or possibly worked but at the least done no harm) or we can do things that have not worked in the past. As a student of history I find no value in our repeating things that haven’t worked in the past. So I dismiss the most conservative approach which is that the government do nothing and allow market forces to determine the future. That was Cleveland’s approach in the 1890's and ultimately with the Spanish American War the country came out of the 1890's depression. Waiting for the cycle to turn was Hoover’s approach; but even with all the programs of the New Deal it took the massive government spending during WWII to get us out of that Great Depression. So I reject the radical right wing Republican Perry/Paul approach of doing nothing.
Now, we can also lower taxes and cut expenses. When this was tried in 1938, as the country seemed finally to be turning a corner, it plunged us back into the Depression. When the economy turns down and therefore government revenues decrease it makes no sense to lower taxes and cut spending. Such action merely further slows down the economy by creating unemployment (loss of public sector jobs) and reducing ability of consumers to purchase.
We can also reduce the deficit, stop borrowing and solve the problems that threaten to undermine our country in 2037 (Social Security) and in the mid 2020's (Medicare). But why are we solving the long term problems of a generation hence and not addressing the immediate problems of today and tomorrow - massive unemployment, lack of investment in education and repair of infrastructure.
We can stop issuing paper money backed by the full faith and credit of the United States and return to the Gold Standard. I think that means that a dollar would be worth an ounce or some portion of an ounce of Gold - a commodity that currently trades on the open markets and fluctuates. I think governments set the value of the currency to the gold so it won’t fluctuate. The US was the last major western industrial nation to leave the Gold Standard in the 1930's. In the years of the Gold Standard there were silver miners who wielded great political power and from post Civil War times lobbied, sometimes successfully, for a bimetallic system where currency would be based on Gold and Silver - it was thought that would increase the amount of currency in circulation. There was much debate over the ratio of Gold to Silver that would be coined and fixed to the value of the currency. This may make sense to some people it doesn’t to me. We might just as well go back to trading beads and selling Manhattan for items that value $24.
We could try some ideas that worked during the Great Depression - they may not have gotten us out of the Depression but they made it easier for the vast majority of the people to survive and instilled hope in the future. We could undertake a major public works program to repair and replace all that infrastructure, bridges, buildings etc. that were in most cases first built in the 1930’s; and we can do it by borrowing at a time when American debt is being purchased around the world for the lowest interest rate in history. When you can sell bonds at a low interest rate you sell them. If we wait to deal with our infrastructure problems another decade we will find ourselves forced to borrow at high interest rates and simply increase the national debt.
We can create jobs for youth, working in inner cities and rural areas. We can increase the weeks of unemployment payments and thus put more purchasing power in to the economy which then causes producers to produce more goods and thus causes economic growth. And we can for another year or so have a social security tax holiday to put a few dollars more into the pocket books of the workers of America. If we won’t pay for this by taxing the millionaires who have reaped the benefits for the past thirty years of economic progress than we can borrow at record low interest rates.
I am not a trained economist. I am sure that those who understand economic theory whether it be Keynesian or supply-side can argue against my simple historically guided suggestions. Franklin Delano Roosevelt offered the thought that when faced with a problem we should do something, if it didn’t’ work we should try something else, and if needed try another idea but most importantly do something.
22 August 2011
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