I had not thought before how the current era is a reversal of the FDR era.
We've had the war. Now are we going to fight the peace?
It may well be true, as Joseph Stiglitz believes, that the Iraq War cost us $3 trillion. We know we put $1 trillion into the actual fight. Figure another $1 trillion in a phony real estate bubble, another $1 trillion of Confederate Money used to cover it all up, and you get to $3 trillion pretty quick.
War first, Depression after.
There was fear this would happen after World War II, and it was a background character in the film The Best Years of our Lives. What prevented that Depression was new demand, driven by the GI Bill and the Marshall Plan. It was summed up in a speech by Frederic March, playing sergeant-banker Al Stephenson:
There are some who say that the old bank is suffering from hardening of the arteries and of the heart. I refuse to listen to such radical talk. I say that our bank is alive, it's, it's generous, it's, it's human, and we're going to have such a line of customers seeking and getting small loans that people will think we're gambling with the depositors' money. And we will be. We'll be gambling on the future of this country.
Point is Republicans have always rejected the idea of stimulating demand, unless they could kill people with what resulted. Without the Cold War they would have crucified Truman, and the Baby Boom boom would not have happened.
It's amazing to me that the same people who thought nothing about laying out $1 trillion to kill people, and who ignored the theft of another $1 trillion covering it up, who called all this patriotic and ideologically sound, are now so uniformly condemning the President's efforts to stimulate demand and fight the war at home.
So let's be clear about this money. Let's be clear about where it comes from, where it's going, and what our choices are.
1. The TARP is not borrowed money. It's replacement money. It replaces the phony money created during the Bush years, the Confederate money everyone lost in the markets, and to all the frauds of the recent past. It is not being borrowed from the Chinese. It is being created of whole cloth, and its creation is sound policy.
What we do with that money is a choice policymakers can make. The Bush people gave it to the same people who had lost the last batch. The Obama people want to do some of the same, only with safeguards to keep folks from repeating past mistakes, and to put some toward bad mortgages.
2. Deflation is the enemy. Today's deflationary spiral is actually worse than the one we faced in the last century. Prices fell, but wages fell faster, and by the bottom of the Depression one family in every three had no income at all.
It's worse now because Internet business models allow prices to be cut very, very rapidly. Labor demand can go overseas, no one has to buy software, capital can be shifted in an eye blink through computer clouds.
We have been living in a deflationary spiral for decades, thanks to Moore's Law. We just didn't know it. The savings from those productivity gains were soaked up by new demand. Now they are not being soaked up, and they will suck us down unless we do something about it. (The poster above is a great example. AP is hoping to soak up its profits because its business model was broken by the Internet.)
3. The new economy must be different. We can't afford a recovery based on home sales and consumer goods. The world is burning up. We face a Mathusian nightmare leading to a Hobson's Choice. We must win the War Against Oil despite deflating prices for hydrocarbons.
The way we have been going leads to the death of our grandchildren. We must, as a society, change course — business, government, all of us. New government-led demand can lead to this change, as it did after World War II, as it did during the Great Depression. Without new, government-directed demand the economy is rudderless. It is heading to the rocks and all hands will be lost.
The current debate is the first attempt to turn the wheel of the world toward a new and more sustainable course. The U.S. must lead this effort. No other nation is capable. We use one-fourth of the world's energy, we have the world's highest standard of living, and no nation will suffer so much as this one if we fail.
I agree with those who fear the present proposals may prove inadequate to the task. It might be nice if Obama were the King that Bush claimed to be. He's not. This must all be done democratically. Which means messily, and at a measured pace.
In that effort we are fortunate, because this President combines the writing strengths of Lincoln, the rhetorical strengths of Reagan, and the highly-polished political intellect of Franklin Roosevelt. (That and a nice 15-foot jump shot.) Maybe not all of them, maybe not all in their measures, but perhaps enough to get us through.
Republicans did the President a favor by using their old political tricks to threaten the present bill. It's an important lesson, one he won't forget. It's also one the rest of us should not forget. He offered to treat them as adults, they behaved like Confederates, and from here they should be treated as such.
Give 'em hell, Barry.
