Thursday, January 08, 2009

Facing Up to Trickle Up

I was reminded of another Principle for making anything better economically by this good discussion between Dean Baker and Arun Gupta about the Obama - really the Summers - Stimulus. They were pointing out that it's too small, and too skewed towards tax cuts instead of direct spending, and too skewed towards business and not enough towards poor people. There's continuous enormous need among leaders to give money to the top, e.g. the biggest banks. It doesn't matter how incompetent they are, as long as they're at the top. But money to middling and poor people? Much less likely. And it doesn't matter how much more likely they are to spend it.

Gupta estimated that "Business tax cuts give about twenty-five to thirty cents on the dollar." And he went on to point on that a lot of tax-cut-driven consumption goes to buying foreign-made products. Yesterday Obama promised $1000 per household. Gupta noted like many others that the best way to stimulate the economy is infrastructure spending.

Can the US, after decades of tireless slamming of the entire government sector - from unemployment offices to urban bus systems - spend real money on public services? That's where the real rebuilding will be. But it will mean spending big money on public services that are woven into the lives of the non-wealthy. Think the hybrid city bus, new job training centers with Google-quality equipment and solar capacity built into the materials. US leaders have lived for 40 years by nickle-and-diming the public sector, taxing the middle (with social security taxes on top of income), and moving money up to the top.

Does Washington know how not to give and give to the rich?

I don't think so, and hence half the current stimulus is going to be for business, who will hoard a lot of it, give the rest to shareholders and senior executives, and use another piece to increase their market dominance by buying weaker rivals.

4. Face up to our 19th century social Darwinism. And purge it.

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