♠ Posted by Emmanuel in Cheneynomics at 7/03/2010 12:09:00 AMNot that even $7.87 trillion will probably do much for it: America is so washed up that even I have to feel sorry for it despite its leaders' wrongheaded jihad on fiscal sanity. So here we are, so many months and so many trillions after in US IOUs and America has next to nothing to show for sinking itself further into the fiscal abyss. The unemployment rate is "falling" because so many are becoming disillusioned are joining the ranks of the permanent leisure class. Factory orders are tanking. Consumer confidence is dropping. Absent government taking billion dollar hits propping the housing sector, pending home sales are drawing flies. Are there any lessons here?
It was thus with great incredulity that I read (left-leaning) WSJ writer Thomas Frank's latest missive on why "We Should Avoid the Austerity Trap." This is my favourite part, though there are more, ah, entertaining bits to be found in the rest of the article:
Solve the recession and we'll eventually bring the deficit back down, too. The real danger is that instead we will decide to regard the deficit as a problem entirely unto itself—a quasi-moral issue that needs to be addressed independently of the larger economy—and that we will proceed to budget-balance ourselves right back into the economic ditch.Here are a few things I'd like to ask of red ink fetishists like Frank in light of recent economic data:
- Where are all the returns from stimulus, particularly in the form of wages? If possible, show me "multiplier effects" and that economistic jazz;
- How is this (wasted) stimulus to be paid for?;
- Why should we believe that hundreds of billions more worth of stimulus will work when it has so far yielded next to nothing?
4. How will the continuing growth of government at the expense of the private sector go towards creating a sustainable recovery when the former doesn't create a source of revenues to compensate America's towering obligations?
It's simple, really. If the economic news is uniformly bad, then what you're doing isn't quite good. Unlike with the deficit lovers' promises about stimulus, the numbers indicate an entirely different story. To be fair, the only ones dumber than America spending on things with no apparent gain are those lending to it. That, my friends, is the epitome of subprime globalization.
UPDATE: Also catch General Electric CEO Jeffrey Immelt giving the US a verbal shellacking...
“People are in a really bad mood [in the US],” Mr Immelt said. “We [the US] are a pathetic exporter...we have to become an industrial powerhouse again but you don’t do this when government and entrepreneurs are not in synch.”
Mentioning a meeting with Jean-Claude Trichet, he said the president of the European Central Bank “worries about inflation every day”, in contrast to Ben Bernanke, chairman of the Federal Reserve, who will keep interest rates “at zero” as long as necessary.