The Myths of Economic “Recovery”
Friday, January 23rd, 2009President Obama and congressional leaders met today to discuss the “mammoth” $825 billion economic stimulus package. According to early reports, the necessary legislation is “on track” to pass by February 16 — Presidents Day. Although this is Obama’s first meeting with congressional leaders in his young presidency, much is on the line, perhaps even the new president’s place in history.
Imagine that Obama leads the nation out of the current depression/ recession (take your pick, though I believe we have already entered the former). If he achieves that monumental task he will be hailed as one of the nation’s greatest chief executives, right up there with Washington, Lincoln, the Roosevelts, and Jefferson. Instantly.
The challenge Obama and the rest of the Washington, DC political infrastructure faces, however, is that fixing the economic mess is still going to be incredibly painful for otherwise hard working, honest, and upstanding people. Millions (perhaps tens of millions?) of citizens are going to be thrown under the bus at the expense of the larger whole.
Quite simply, many of the attempts at “fixing” the economy are bound to backfire, particulary when they add additional burdens to lower and middle class citizens. The nation has already witnessed this over the last several months when the Bush administration distributed the first $350 billion in relief to foundering financial institutions. The unfulfilled assumption was that the money would trickle down through the system, ultimately finding its way to those who needed help saving their homes or buying things. It did not work.
Let us hope that the new administration will develop novel ways to actually stimulate the economy, not prop up bloated corporations. In the meantime, business and governmental leaders will rely on the same old-hat means that rarely work, or simply outsource the economic burden to those most at risk during economic challenges.
A few examples:
Increased Fines and Fees — Florida’s state representatives met in a special session to cut Florida’s budget to make up for a $2.4 billion gap. One of its less creative measures included raising traffic fines and fees. While the added revenue from such fines may help, it is hard to imagine that this indirect tax against residents and tourists will do much more than increase general animosity. These programs have the greatest consequence for those individuals least able to pay increased fees and fines.
Downsizing — Companies are searching for quick fixes. Historically, laying off workers provides a bump up in stock price and a round of applause on Wall Street. The numbers are so large that they get dizzying, for example, Microsoft downsizing 5,000 and Intel laying off 5-6,000 in recent announcements. Again, corporate executives relying on band-aids to stop arterial bleeding.
There is no way enact massive employee cuts without leaving behind a scared, overworked staff biding its time until the next round of layoffs, let alone cope with the psychological and financial terror that those 11,000 Microsoft/Intel employees face. That is 11,000 additional people who can’t buy the consumer goods that the government hopes will spark the economy, can’t make mortgage payments, and add to the unemployment rolls.
Foreclosure – These most dastardly stimulus “myth” is that the bailout package is going to actually help those in trouble save their homes. It is another vicious cycle scenario — rather than refinance in a manner that allows a person to stay in their house, banks foreclose, and then re-sell the place at a loss. One senses, though, that the rising anger about foreclosures is reaching a point at which people are ready to fight back. Read Ben Ehrenreich’s piece in The Nation for examples of people pushing against the traditional foreclosure system.
The writing on the wall seems pretty clear — traditional methods no longer work. The entire system must be re-calibrated. New rules are necessary. We need to turn our innovation inward to find unique means of creating a new form of capitalism.
For example, imagine the goodwill a team of corporate executives would generate if instead of laying off thousands of employees, they announced a plan to restructure their salaries and pooled the money to keep workers employed. A chief executive earning millions of dollars in salary, benefits, and stock options, in this case, would determine the salary he needed to live comfortably, then turn the rest into the employee pool. For some CEOs, they could forego salaries for years, given the countless millions earned in preceding years.
The bottom line is that $825 billion or $825 trillion will not matter for most people. The discussion is moot when 99 percent of the people one knows live a paycheck-to-paycheck existence. Sending $30 billion to save a failing bank or $600 or $1,500 to each person in the country, encouraging them to go out and buy things, is not going to save the economy. Imagine, one paycheck from economic ruin.
