Unleash Fiscal Policy?
So says Robert Reich. And what he means is investment in infrastructure.
When Philip Swagel, the administration’s spokesman, was asked if the economy needs another stimulus package after having lost 62,000 jobs, all he could say was
“I-it seems, you know, it seems like that’s, that’s enough, uh, enough.”
What might trigger another round of economic stimulus?
“I don’t, I guess I don’t have an answer, I mean, you know, beyond saying we look at all the data and, um — so, my usual line.”
Neither men will address the problem of trade. Both see fiscal policy as governing economic health, albeit in differences large enough to continue the irrelevant debate that has consumed both political parties since time began. Boiled down into sound bites, which seems the only way either party can function, the fiscal argument usually revolves around taxation and spending.
Meanwhile, the twin deficits continue to rise. Our last trade surplus was in 1975–mostly downhill from then. Strangely enough our account deficit has risen since then. Conclusion? We relied more and more on credit, both personal and governmental.
Clintonites will argue, of course, that under their watch, there were account surpluses. I would point out, however, that the trade balance began to rise sharply in the Clinton watch, moving from -70 billion in 1993 to -378 billion in 2000.
Clinton rode the dot.com wave….lucky. He happened to govern while the U.S. led the world in a marvelous IT revolution. While jobs increased and government coffers filled, the trade deficit increased sharply, over 500%. In short, the central issue of trade was muffled. Have you ever heard a Clintonite brag about trade surpluses?
Since Clinton, of course, the trade deficit has doubled. The only bright spot in the trade deficit has been services, mostly financial. (Republicans like bankers. Unfortunately, financial services while a golden opportunity for a few, were not so good for the average American.) Various arguments have been used to soften this harsh reality; economists have gone to measure deficits in terms of percentage of GDP, hopefully to show us that it aint all that bad. Well, it is. Trade is important.
Some economists argue that the falling dollar will make our goods cheaper on the world market, thus dramatically improving our trade balance. Hmmmm. Aint happened yet. We keep shedding manufacturing jobs.
To keep ahead of the downward curve, businesses outsource or overseas everything, from teeth to sneakers. Of course, the fallling dollar will encourage foreign tourists…. but now there is the problem of oil. On this last and most dramatic of our headaches, I would suggest that it may be the straw that breaks the camel’s back or it may be ironically be our savior.
How our savior? If the present spike in oil is not primarily speculation–and I suggest that we will know this by year’s end– and if exporting countries stop subsidizing the cost of oil–, then we may have to become more local. Transportation costs of goods will rise, from ships and planes to trucks. Rail will be less expensive. (Now there’s an infrastructure worth talking about.)
Additionally, we will have either to find alternatives to oil in the manufacturing of some goods (plastics, for example) or find suitable alternatives that do do require oil. We also need cars with much, much better mileage. In other words, inventiveness will again count. Shortcuts–cheap labor and environmental degradation–will be throttled.
If the present spike is speculation–and I suspect it isn’t–, then we will be left with facing our old bugaboo: Trade. And no amount of pump priming fiscal policy a la tax cuts or infrastructure will do the complete job.