It’s time for a jubilee

The Thinker by Rodin

Seems like our world is going to hell in a corona basket.

I remember at the end of 2019 all my friends were saying they were never so glad to see a year end. 2019 was a miserable year. Now, most of us would prefer to be back to 2019. A recession that looks like it will become a depression and COVID-19, which may kill a million or more of us, seems like the beginning of the Armageddon that so many so-called Christians are looking forward to. Perhaps that’s why many of them were cheering Trump’s suggestion that everything go back to normal on Easter Sunday.

On that last point, I was going to make a blog post just on that, but I can’t possibly restate any better what so many others have already said about Trump’s unbelievable narcissism. Trump wants us to die so he can get reelected. The smart ones though are going to take a pass and will keep sheltering in place and obsessively washing hands and surfaces. I know we are. Evolution is not called “survival of the fittest” for nothing. For those happy to place emotion or devotion to an insane leader over rational behavior, well, you’ll be one of hundreds of thousands of candidates for the 2020 Darwin Awards. Clearly you weren’t reading my blog, but don’t say I didn’t warn you.

So rather than restate what so many others have already said, let me talk about something that isn’t being much talked about: the way our economy works appears to be crumbling. What do I mean by that? I mean the way we have been running an economy where the rich continue to get richer, the poor more desperate and in debt, and our government more dysfunctional is ripe. It’s not only not working, it’s not working badly for us. We are ripe for revolutionary changes. This upcoming depression (which it looks likely to be) should make us anxious for another New Deal.

It won’t look quite the same as the New Deal and hopefully any depression will be short lived. But our economy is loaded to the maximum with debt. Pretty much everyone, except the rich, holds it. That’s individuals and corporations, made possible by low interest rates since the Great Recession. The Federal Reserve’s recovery plan is to cut interest rates to zero or even lower, trying to coax us to take on even more debt. That’s because they don’t have any other tools to use. Trying to grow out of a depression based on taking on more debt that we already couldn’t afford doesn’t sound very sound to me. It feels desperate, as if we are desperately trying to keep the rules of our old sinking economy alive. The so-called $2T recovery bill signed into law today is an attempt to keep this hamster wheel turning.

I don’t think this will work. First, look how long it took us to emerge from the Great Recession. When we did emerge, our growth rate was always anemic. You’d be hard-pressed to find any quarter where our GDP increased by more than three percent annually. Our economy was like an overloaded subcompact running on three cylinders trying to merge onto the Interstate. It took a long time to get up to highway speeds. And while we technically recovered, we never really felt we recovered because we never fundamentally solved the problems that got us into it in the first place. The half-hearted attempts by Democrats in 2009 and 2010 were not nearly enough.

In fact, we went back and made the same stupid mistakes all over again, such as getting rid of much of Dodd-Frank banking regulation that was supposed to prevent it from happening again. The fundamentals of our recovering economy were never sound, but were propped up by low interest rates which had the side effect of causing markets to rise. Companies used cheap credit to buy back their own stocks, inflating their stock prices to surreal levels. The bubble would have burst anyhow; the coronavirus thing just made the hole gaping instead of possibly manageable.

What would really make the economy roar back when this pandemic is contained is a big haircut to a lot of creditors. Because an economy can’t roar back if overleveraged people have no cash to buy stuff. What we really need is a jubilee. This is where we force creditors to wipe their debt slates clean.

Take, for example, student loans. Last I checked, there were about a trillion dollars in outstanding student loans, owed by people the least able to pay them back. Desperate for an education instead of flipping burgers for forty years, they didn’t have much choice but to pay usury interest rates for educations whose costs were vastly inflated. Let’s declare all that debt insolvent. The creditors will scream, but a lot of people will have money to spend again on things that matter like food and housing.

It could be done for lots of debts. Write off, say, 25% of mortgage debt on housing purchased for up to $500,000. Wipe out 50% of credit card debt. If you want to encourage thrift, revert the debt if more is incurred over the next five years.

And tax the rich. They’ve been bleeding the rest of us dry for too long, in the process allowing infrastructure and services to degrade. Institute Elizabeth Warren’s proposed 2% wealth tax. Raise rates just to where there were for rich households during the Reagan Administration. Tax dividends the same as ordinary income, or higher. Make work pay again.

Then do what we all know we need to do: make Medicare available to all. Much household debt and personal bankruptcies are due to medical costs that are out of control. Controlling medical costs frees up all sorts of money for more productive use. Institute living wages for everyone with annual increases that keep pace with inflation. Overturn right to work laws.

This is probably beyond a President Biden. But without it, I suspect a President Biden will discover what President Obama discovered: the system will work in counterproductive ways against the needs of the people instead.

Our election, if it can be held fairly, will likely put Democrats in control of government plus give them the margins needed to make real change happen. The question is whether Democrats have learned their lesson, and can institute the changes we need to make the economy work for everyone again.

If not, election 2022 will look a lot like Election 2010, and the crazy cycle will continue to repeat and move us into second world status.

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