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Rethinking Economic Actions By Democrats

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After encountering two independent mentions of recent economic actions proposed and enacted by Democrats by sources I’ve come to trust, I find myself looking at them in new light.  The program most in question for me is Cash for Clunkers.  It’s proven wildly popular, and at first I thought that was a great thing.  With additional perspectives, I’m no longer sure it is.

First of all, I’m going to squash a talking point that Democrats are using to justify the program: the environmental benefits.  They don’t exist.  At least not the to the extent that Democrats like Sen. Levin would have you believe.  The environmental benefits of Cash for Clunkers is negligible.  Here are the key stats:

The total savings per year from cash for clunkers translates to about 57 minutes of America’s output of the chief greenhouse gas.

U.S. drivers go through that amount of gas every 4 1/2 hours, according to the Department of Energy.

So we’re giving away $1,000,000,000 dollars to get 250,000 cars off the road to save 57 minutes of carbon emissions and 4 1/2 hours of gas.  Is that really the best use of money that we can come up with?  I don’t think so.  How about investing that $1 Billion in research on battery technologies – that would generate many times the investment in future returns.

Which brings me to my next point – the one raised by my two sources.  How are we paying for this program – and it’s $2 Billion expansion?  We’re not.  It’s part of the deficit spending the Obama administration is extolling.  Which leads me to a question: why were Democrats against invasion/occupation deficit spending and not Wall St./Clunkers spending?   Is it simply because Barack Obama, or Democrats at large] is [are] advocating for the latter?  That’s ideological, not principled.

Look, let me put it another way.  We’re moving spending from future quarters to current quarters.  That will make this quarter’s and perhaps next quarter’s economic numbers look better than they otherwise would.  In other words, Democrats are all for the appearance of an improving economy without doing anything about the underlying causes of the crappy economy we’ve produced over the past 30+ years.  How will future quarters show continued economic growth?  The only way it will happen is if Americans spend more.  How will they spend more and not create additional credit bubbles?  The only way that will happen is if they get paid more or if more Americans are employed.

And that gets to the dirty little secret no politician of either major party wants to discuss: real wages haven’t increased in the past 30 years.  Inflation has increased prices.  Every average American’s expenses have been artificially driven up by greedy corporations hell-bent on maximizing profit at the expense of everything else.  And that’s where Democrats will fall into trouble, more quickly than many realize, I fear.  Without real improvement in real income, we will not fully recover from this super-recession.  Read that again – we will not recover unless real incomes increase substantially.

Ever since the 1991 recession, recoveries have taken longer and were less impressive than previous recoveries in the last century.  The net worth and net income of the richest have continued to grow by double and triple digit percentages, but net worth and net income of the rest of us haven’t.  Jobs must be created: how will that happen in a market in which corporations have offshored jobs for 20+ years?  Economies can’t grow unless things are created within the economy.  We make fewer things in America today than we did in the past. Until that changes, there will be a weak recovery and future downturns will hurt all the more.

I doubt Cash for Clunkers is going to jump-start the manufacturing in this country to the degree it needs to be.  Americans need to decide what’s important to them: real jobs making real things in America or giant boom and bust cycles which perpetually make the rich super-rich and everybody else fall further behind.

[Update 8/7/09]: I found another trustworthy source’s take, which I couldn’t locate yesterday for some reason.  The $3 billion isn’t coming from new taxes – so it has to come from some other program that was already approved.  It came from an unfortunate source: a pot of money for helping renewable energy projects get quality loans.  That’s correct: renewable energy projects are facing $3 billion less in that pot that they were before.  This is a case of robbing Peter to pay Paul.  $3 billion worth of renewable energy projects will easily generate many times that sum back into the economy.  It would also do more for the environmental impact that Democrats are desperate to flout since it’s the “in thing” to do.

That pot of money tangentially relates to TARP – the giant corporate welfare giveaway that Bush initiated last year.  With hundreds of billions of dollars in giveaways, don’t you think the banks should be lending that money out, since that’s what it was supposedly designed to do?  With the banks’ input, there was no strings in that legislation.  They were free to do with it as they chose.  And they chose to hoard it, not grow the economy.

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