For most Americans, particularly the unemployed ones, the 2012 elections cannot come too soon. Sadly, most Americans who could vote did not bother to vote in the 2010 midterms, particularly the unemployed ones who were having trouble keeping a fixed address. This allowed the crazies (a.k.a. Tea Party Republicans) to get control of one house of Congress. Many of those who did vote for the Tea Party though did so on the assumption that they would do something tangible to create jobs.
Silly voters. Of course everything Republicans say they are doing is to help facilitate job creation. Yet despite all the tax cuts, spending cuts, and regulatory changes our unemployment rate remains basically unchanged at 9.1 percent. In fact, the unemployment rate has gone up since January, when Republicans came into power in the House. (It was 9.0% in January 2011.) Cutting the deficit is somehow supposed to create jobs, but it has also added hundreds of thousands of public sector workers to the unemployment roles as governments everywhere pare spending. Other tactics to reign in spending, like the brouhaha over extending the federal debt ceiling, only served to make our creditors more nervous, adding more uncertainty into the economy, possibly triggering a double dip recession. The stimulus, which at least succeeded in priming the economy a bit and reducing the unemployment rate a percentage or so, is all gone. Meanwhile, businesses are sitting on record amounts of capital, but don’t want to use it to do any hiring because of all the uncertainty in the economy.
Next week President Obama plans to deliver a speech on unemployment to a joint session of Congress. He is expected to say Congress must act to create jobs, but the initiative is almost doomed to go nowhere. Which means if you are unemployed you have to hope against hope that despite all these negative signs employment will pick up, or saner heads will prevail after the 2012 election. If you are getting by on food stamps, you may want to start your own vegetable garden because so many Americans are on food stamps that the program is running out of money, so it is likely to get chopped back. And if you are one of the long-term unemployed that have depended on extended unemployment benefits for at least some income, those benefits will stop arriving soon. So the prognosis for an economic recovery before the election is not great, and made even worse by cutting food stamps and unemployment payments. That’s even less money that will go into the economy.
Republicans take as a matter of faith that if the government stops interfering with the private sector, then free from these constraints the private sector will pick up the slack by investing and hiring people. So far the evidence is just the opposite. The truth is of all the agents that can cause economic growth to occur, in the short term the government is the only that could truly change the dynamic. This is because through intelligent policy, government can inject money into the economy that buys goods and services, and helps employ more people. When people are employed, they have income that they spend, which puts more income in other people’s pockets, which causes growth and begins a virtuous cycle. Moreover, our ability to do so has arguably never been cheaper. Interest on U.S. treasury bills are less than inflation, which effectively means not only that we can borrow money interest free, but also that others are actually paying us money to give us money.
The evidence suggests that if the U.S. were to borrow money now and put it to use to grow the economy, through projects we already need like infrastructure improvements, we would stimulate the economy, effectively pay no interest to do so, and begin a virtuous cycle that would increase employment and growth. Moreover, as people acquire income again, they also contribute taxes again at all levels, which give governments more income than they would have otherwise. Intelligent short term deficit spending now seems very likely to reduce long term deficits through economic growth, which comes back to the treasury in the form of increased tax revenues.
It’s clear to me that Republicans really have no desire to grow the economy or bring down unemployment, at least not until Obama is out of office. And they are willing to keep Americans unemployed to be faithful to an ideology that is proving not to work. Indeed, they seem intent to throw sand into the engine of our economy. The hope seems to be that Americans will blame Obama instead of their party in 2012, although polls suggest Republicans and Tea Party Republicans in particular will shoulder most of the blame.
The only thing we can say for sure is that there is at least a year more of misery ahead, and it will be borne principally by the unemployed and the disenfranchised because Republicans will put ideology ahead of the needs of the American people.