Wednesday, 18 July 2012

Voodoo Economics?

In the midst of Memorial Day Weekend up in County East Durham, a gentleman, while allowing that he enjoyed this column, wondered if I might not “be a little kinder to Republicans?”

I think I’ve been fairly respectful of all shades of political opinion, even if I often do hold Republicans to the standards of such party icons as Jefferson, Lincoln, Teddy Roosevelt and Eisenhower.

Truth be told, though, I have problems with both parties and how they’ve become beholden to big money; in fact, the current hat-in-hand begging by both presidential candidates not only lacks dignity but could ultimately prove toxic for democracy.

That being said, I can’t toss my hat in with any party that refuses to deal with economic reality.

Those who read these columns will recall that I consistently warned about budget deficits way before such concerns gained traction during the Obama administration.

Apart from voices in the wilderness like Ron Paul, most Republicans backed President Bush’s notion that you could cut taxes and simultaneously fight two wars of choice. “Starve the beast”, a.k.a. the Federal Government, was the battle cry even if it meant evaporating the Clinton budget surplus.

But credit where it’s due – President Bush did take initial steps to shore up a financial system on the brink of collapse in 2008 and along with President Obama prevented a meltdown of modern capitalism. Does anyone actually remember that the Dow nose-dived to 6500 from 14,000 taking with it many the dream and 401(K)?

Some form of huge federal investment in the economy was obviously called for. The problem was that in order to get it past congress the Obama stimulus had to be loaded with almost 40% in tax cuts.

Tax cuts, however, by their nature rarely tend to jump-start an economy. Why? Because in tough times the prudent do not rush out to buy a new plasma TV at the sight of a few more bucks more in their paycheck or at the prospect of a less frightening tax bill the following April.

Which is why Governor Romney’s promise to cut taxes if elected will have one surefire effect – balloon the current federal deficit.

One could argue that this shrinking of tax receipts will be balanced by stringent cuts - which of themselves will lead to more job losses. But the real problem with such a strategy is that defense and health costs must be shaved for any kind of meaningful deficit reduction.

Governor Romney’s proposal to peg defense spending to 20% of the federal budget removes option one; while his proposed gutting of Obamacare will not only increase health costs and budget deficits but reduce coverage, thereby undermining the general health of the citizenry.

The real problem with Obamacare is not that it’s intrusive but that, like the system it replaces and Republican free-market based proposals, it will not curb rising costs.

The medical Fee for Service system will see to that – if someone else is paying why not employ a brain scan to diagnose that pain in your big toe. You never know, it might help...

The second major plank in the Republican platform is cutting regulations. Fair enough, businesses do have to deal with too much red tape. But if that means allowing banks to return to their Wild West casino days, then fuggedaboutit!

Witness the recent wholesale sycophantic treatment of “President Obama’s favorite banker,” JP Morgan’s Jamie Dimon, by both Republican and Democratic senators, even though it now turns out that his firm may have blown 7 or more billion in speculative derivative trading rather than the 2 billion he suggested. And you want to loosen regulations and give guys like that their head again?

It’s way past time for the GOP to be specific and provide real figures to back up their proposals. The last thing this country needs right now is a reprise of President George W Bush’s failed policies.

We deserve a viable alternative to an increasingly toothless Democratic Party. But to paraphrase President George H. Bush – voodoo economics are not the solution.

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