Three articles in today’s New York Times have only reinforced my determination to get the word #Demandside into the national conversation. I have little faith in anything, let alone American politics or the national discourse, but I do have utter faith in the notion that if our political so-called leaders do not return to pre-Reagan-era demand-side economics, we can kiss the prospect for shared prosperity good-bye.
As I write those words, I have to quickly remind myself that members of America’s ruling class, especially on the right, are in an ideological rut that encourages them to believe an idea like “shared prosperity” is not just wrong-headed but immoral. It’s this aspect of their ideology that gives them permission to engage in criminally irresponsible acts, like the extortion we are witnessing now from Republicans in Congress over the debt ceiling. Republicans are slavishly beholden to the idea that raising taxes on the so-called “job creators” will damage the recovery, but history is proving, with painful clarity, that this sacred idea of theirs is patently delusional. It’s delusional because a) the recovery appears to be faltering already, and b) not even the extension of the 2001 Bush tax cuts and two simultaneous wars have stimulated America’s captains of industry to create enough jobs to bring the unemployment level back to that of the 1990s, when their tax rates were higher. As evidence for b) see a).
As evidence for a) [all bold-faced emphasis is mine]:
The Commerce Department said Friday that wholesale inventories rose 1.8 percent in May, the biggest gain since October. Some of that increase reflected an unwanted buildup of goods because sales declined….
The weakness in May sales offered the latest evidence that the economy slowed in the spring as consumers struggled with soaring gas prices and high unemployment….
The economy grew at an annual rate of 1.9 percent in the first three months of the year. Analysts are expecting similarly weak growth in the April-June quarter.
Growth is expected to pick up to a 3.2 percent rate in the final six months of the year, according to an Associated Press survey of 38 economists.
Still, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow at a 5 percent pace for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year will simply keep up with population growth and hold the rate steady.
For the second consecutive month, employers added scarcely any jobs in June, startling evidence that the economic recovery is stumbling….
Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted….
Stock market investors largely shrugged off the bleak labor report, as the Standard & Poor’s 500-stock index fell less than 1 percent to close at 1,343.80 on Friday. They have taken comfort in relatively strong corporate profits, aided in no small part by global sales. The discordance between business strength and feeble hiring has raised concerns that companies will continue to rely on productivity gains and investments in equipment, as opposed to more workers, to fuel growth.
These two pieces of the puzzle reflect the larger reality, it seems to me, that there cannot be a private solution to the jobs problem because the supply-side of the American economy is confident it will survive whatever slough of despond the rest of us are about to enter into just by waiting it out. And it has good reason to believe it will be just fine. America’s political class, Democratic as well as Republican, have been well-trained in the practice of supply-side interest politics in every circumstance, no matter the issue. Republicans, of course, are notoriously single-minded about the solution to all economic problems: cut taxes, cut spending, loosen regulations. Favor the “productive” class at every opportunity and the rest will take care of itself:
“Raising taxes on our nation’s jobs creators is yet another failed policy that will make the economy worse,” Senator John Thune of South Dakota, a member of the Senate Republican leadership, told reporters. “Instead of looking at ways to raise taxes, we ought to be looking at the countless ways we could reduce federal spending and enact policies to grow the economy and create jobs.”
Mr. Boehner, several Congressional aides said, is aligned with Mr. Obama in the belief that a big deal is better than a midrange one. But he, too, blamed the president for the faltering job market, saying it “is more evidence that the misguided ‘stimulus’ spending binge, excessive regulations and an overwhelming national debt continue to hold back private-sector job creation in our country.”
The wonder is that anyone takes seriously the Republican boys who cry “supply-side” in every instance after thirty years of their own failed policy. Actually, it’s not to wonder. Republicans have succeeded, aided by a refusal (or incapability, which is just as shameful and inexcusable) of Democrats to oppose it effectively, to turn their fantastic ideas about economics into the national ideology.
Well, the only hope for us, I’m firmly convinced, is a return to government policy that favors and encourages demand. If we really want jobs, we have to stimulate demand in a BIG way. We have to enable consumers to act on their need to consume, which will free those store-rooms of goods and stimulate manufacturers to hire labor to manufacture more goods to meet the demand. Economics 101, this used to be. Unfortunately, because of the poor state of American politics, we have to rely on those shameful, unreliable Democrats to, not just hold firm, but aggressively push demand-side back onto the table.
Or we could rely on each other.
I’d appreciate any help I can get to spread the #DEMANDside hash tag on Twitter, whenever talk of jobs and idiotic tax-cutting comes up.