My Therapeutic Rant on the Current Economic Madness

During the Vietnam War, a U.S. soldier seems to have anticipated the spirit of the current economic policy, explaining: “we had to destroy the village in order to save it.” The difference today is that while the government destroys villages of the working classes, it is devoting enormous to improve the castles of the rich.

Anyone can see the care and feeding of bankers and financiers, while treating much of the rest of the economy with an iron fist.

The problem is compounded because alongside the federal stimulus, funding for state and local government is falling off the cliff, in effect, neutralizing much of the stimulus. This contradiction in economic policy is nothing new. A half century ago, E. Cary Brown showed him austerity in state and local governments undid much of the New Deal.

Brown, E. Cary. 1956. “Fiscal Policy in the ‘Thirties: A Reappraisal.” The American Economic Review, Vol. 46, no. 5 (December): pp. 863-66.

Nowhere is that policy divergence clearer than in California. A Republican minority blocks all tax increases. The budget deficit seems to increase by a few billions every few weeks. The answer is to eliminate welfare, slash payment to home healthcare workers, and decimate education.

I have been looking at papers by Greg Duncan showing the devastating effect of child poverty on children’s productive capacity as they mature. In my forthcoming book, The Invisible Handcuffs, I discuss literature that compares the consequences of child poverty on brain development, an effect that resembles the impact of a stroke.

Conservatives worry about future tax costs, but what if the losses in the capacity to pay costs exceeds the presumed future burdens of public debt.


3 comments so far

  1. Seth Sandronsky on

    Robert Scheer channeled you in The Sacramento Bee today.

  2. Mark Hansen on

    not that i condone the refusal of the republicans in the cal state legislature to any change in taxes other that lowering them for businesses, but the fault, i think, lies in the the fact that it takes a 2/3 majority to pass a tax increase and i suspect only a simple mjority to pass a decrease.
    as an aside: has any study been given to the government takeover of the bankrupt eastern rail lines forming “conrail” and then its subsequent sell off (after billions of dollars invested), by reagan and liddy dole because “government is the problem, not the solution.”

  3. mperelman on

    Mark, you are right that the 2/3 majority is lunacy. The purpose is to create an inability to tax and to undermine the potential for government to accomplish anything positive.

    Regarding Conrail, I have not seen any study, but watch how it is playing out under Obama as the government relieves business of its obligations — for example, selling its warrants back to the banks at a fraction of their value.

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