Recession Curatives

"It's all about stuff." -- George Carlin
Prices rise to absorb the amount of money available. Ask any tourist.

   An economy, simplistically put, is the production and trading of stuff.
   Here's a lesson from the George Carlin School of Economics. I got stuff; you got stuff. Let's trade. I want some of your stuff because you have extra, but I don't have the kind of stuff you want. OK, let's invent money, so I can buy your stuff and you can buy what you want from other people.
   A recession, also known as an economic downturn, happens when total output of goods and services in a country declines for two consecutive fiscal quarters. People stop producing, selling and buying stuff, and one way to change that is to make sure prices are low enough and people have money enough to get back in the game.
   Recessions happen when consumers stop spending and companies stop investing (spending) on production.
   There are several ways to fix that:
   One/ Reduce prices and/or interest rates, so consumers and firms can better afford to buy more stuff.
   Two/ Increase the amount of money available, which will lower interest rates. However, that can boost prices, putting stuff further out of reach of consumers. It's called inflation.
   Three/ If consumers and firms don't respond to the first two measures, government can step in, buying more stuff and investing in projects, thus putting people to work so they in turn have money to buy stuff on their own.

   In the past, the accepted wisdom was to leave the economy alone, and it will work itself through the cycle and eventually revive. We should live so long.
   Another strategy is for government to cut spending and raise taxes, as a way of reducing its debt, on the premise that government debt is a bad thing. Or is it? Both actions slow the money flow, and while that may be a good thing for a government, it's bad for consumers and firms, since a reduction in spending cuts worker income, and higher taxes cut into company profits, making them less able to borrow and invest in production capacity.
   Recent experience in Japan shows that strategy doesn't work, and it sent that nation's economy back into recession.
   How about cutting spending as well as taxes? That, however, trims government money flow, which in turn reduces its ability to contribute to recovery.
   How about raising both? By increasing spending as well as taxes, a government could help consumers but at the same time it would harm companies.
   Consider option three: Increase government spending and reduce taxes. That would certainly put government further into debt, but it would help both consumers and firms. Then, when the economy recovers, government can revise its strategy by stepping back, lowering spending as the private sector regains strength, and raising taxes so it can pay down the debt incurred in reviving the economy.
      The trick is in knowing when to do that, so government efforts don't crowd out company efforts to take advantage of low interest rates and increase their investment.
   Taking money out of the economic flow may enrich government officials and reduce government debt, but the rest of the economic population -- consumers and companies -- are reduced.

Word Power

   Words carry power. When used too often, however, their strength is weakened. How often is too often? When the reader or listener notices that a particular word or phrase is being used repeatedly.
   Weather reporters become enamored of the phrase "Arctic blast." Recently, "iconic" has popped up as many as three times in a five-minute time frame.
   Maybe someone could invent an "iconograph" to count the number of times a word or phrase is used by TV or radio folk.
   Repetition for emphasis is one thing; it's a useful rhetorical device. When it becomes redundancy, however, it diminishes the power of the word.

   Word power can also be used to diminish one person's abilities while leaving out similar characteristics of another.
   Example: Some Republican political operatives have been warning that Hillary Clinton, if elected in 2016, would be the "second oldest President in history."
   This a true statement about the potential Democratic candidate. However, such a warning implies that age is a disabling factor.
   Moreover, the warning does not mention who the oldest President was. That would be Ronald Reagan, the GOP idol who took office Jan. 20, 1981, just two weeks shy of his 70th birthday. It also does not mention that Reagan was suffering from dementia toward the end of his second term.
   Hillary Clinton would indeed be the second oldest President, if elected. She was born Oct. 26, 1947, and on Election Day 2016, she will have just turned 69.

   Is any of this relevant? That's for voters to decide. However, as Reagan himself said during a pre-election debate, he had no intention of criticizing his opponent's "youth and inexperience."

Reporter's Creed

"There are no dumb questions; only dumb answers."

   In the world of free, unfettered journalism, any reporter or interviewer can ask any question of any official at any time, following the above guideline and hoping to lure the interviewee into saying something newsworthy.
   In fact, that guideline is not true: There are indeed dumb questions, often born of ignorance. However, while ignorance may explain the problem, it does not excuse it, especially when perpetrated by alleged professionals.
   Example: Two government tourism officials from the Republic of Ireland were asked by a Boston-based TV host -- whose program is syndicated to several hundred stations -- 
whether Ireland had any plans to leave the United Kingdom, following the vote on the issue taken in Scotland.
   Example 2: Another TV host asked the same Irish officials why Ireland uses the euro as its monetary base, rather than sterling as do England and Scotland. "It's part of the same island, isn't it?" said the host.

   Quick geography and history lesson: Ireland is an island of itself, and not connected to the other island that comprises England and Scotland. Moreover, Ireland never was part of the United Kingdom, any more than was Canada, Australia, India or any of the other possessions of the British empire. Ireland had, indeed,  been part of the British empire, but Ireland left nearly 100 years ago, beginning with the Easter Rising of 1916.
   
   To their credit, the Irish officials sidestepped the questions. Government, corporate and political folks often do that, either because they don't want to answer the question, or because they don't want to embarrass or insult the alleged journalist for asking a dumb question and risk being called a bully.

Xenophobia

We are all foreigners.

   Foreigners have long been blamed for economic problems, and fear of them has hatched many a plot to keep them out of a country in the hope that doing so would revive prosperity.
   In America, however, unless you are a member of one of the recognized tribes, you are a foreigner. But how many generations must pass before one can claim to be a "native"? Even members of the tribes are descended from people who migrated here across a land bridge from Asia to Alaska and then southward.
   In Europe these days, European Union rules stipulate free movement of citizens from one country to another. In Britain, however, many blame current problems on newcomers, especially those from Eastern Europe -- people trying to escape poverty and economic distress by moving to a land of opportunity. Sound familiar?
   But even those in the UK are descended from immigrants, as far back as the Norman Conquest, with invaders whose members were in a sense Frenchified Vikings. And before that, the Anglo-Saxons migrated from northeastern Germany,  overpowering the Celtic peoples who had moved to the islands from what is now Spain.
   It turns out also that many of the monarchs of England were not themselves English. The Norman (Norse-man) conquerors spoke French, the Tudor monarchs (e.g. Henry VIII) were Welsh, the King James who followed Elizabeth had been king of Scotland for a dozen or more years before he united the two kingdoms, the King William who presided over the rebellious Irish was imported to England from Holland, the Hanoverians were German (e.g. George III, at the time the American colonies declared their independence, barely spoke English at all), and Queen Victoria and her children routinely spoke German at home, as a courtesy to her spouse, Prince Albert of Saxe-Coburg and Gotha.
   The history of America, indeed the history of the entire world, is that of the movement of peoples from one region to another for a host of reasons, ranging from a search for opportunity to a goal of conquest.
   In the American Southwest, non-Hispanics are trying to block the movement of people from Mexico into areas they consider "theirs." They seem to have forgotten that Texas -- and areas that are now states -- used to be part of Mexico, and the non-Hispanics in Texas immigrated to that area and fought a war of independence in the mid-19th Century.  
   Sidelight: A federal court has overturned a law in Arizona that required people to carry documentation to prove their right to be in that state, and therefore were not illegal immigrants.
   But how many people routinely carry documents proving their citizenship? A driver's license isn't enough. And many spend their entire lives in America without a passport and don't carry a certified copy of their birth certificate with them at all times.

Mandate

"Figures don't lie, but liars do figure." -- Mark Twain.

By choosing which set of numbers to use and redefining the ways they are used, anyone can "prove" anything.

Selectivity in data can be misleading at best, and propaganda at worst.

   Republicans claim the recent election results gave them a mandate.
   But with a turnout of only one out of three voters, can it really be called a mandate? Moreover, a mandate to do what? To follow the path of obstructionism of the past few years? Or if the so-called mandate is an endorsement of a GOP program for progress, just what is that program?
   Second question: When two-thirds of the electorate don't bother to show up, what does that say about the absentees' attitude toward government and its performance? In brief, it speaks to the lack of confidence in the system.
   Pundits have been calling the results a "drubbing" of Democratic candidates, but that's not universally true. In Pennsylvania, a Democratic candidate for governor -- a business exec with no history of elected office -- defeated a Republican incumbent. And in New Jersey, the Democratic senator named in a special election practically walked his way to election for a full term.
   Statisticians speak of sample size in any poll, and when the sample is too small, they do not guarantee the accuracy of the conclusions. In this case, when only one-third of those eligible to vote even show up, and two-thirds fail to participate, that puts into question the validity of any conclusions.
   One conclusion would be that Republican victories were the result of conservative supporters of partisan politics showing up in greater numbers than moderates or liberals. Another conclusion could be that many potential voters were disillusioned with the political system and decided that it was pointless to participate in something that reeked of hypocrisy. A third factor to note is that mid-term elections typically attract fewer voters.
   Or as Archie Bunker once put it, "I save my vote for the really important ones, like the presidential, the senatorial, and the mayororial."
   Put another way, if you didn't vote, you can't complain about the results.

Austerity and the Paradox of Thrift

When everyone saves, no one spends, and the economy stalls.

   Thrift is a good thing. Except that when everybody does it, in its most extreme and widespread form, it can paralyze an entire nation.
   Austerity is a good thing. Except when everyone does it, the cycle of sales and purchases slows and the money flow stops.
   Money is the lifeblood of an economy. But when the lifeblood stops flowing, as with austerity and excessive thrift, the economic body suffers and sickens. The cure, then, is for someone to start spending again.
   In any economy, there are three main drivers to the money flow (the cycle of buying and selling): Consumers, companies and government. During a recession, consumers stop buying and companies stop investing. Consumers trim their spending because many have lost their jobs. Companies cut back because sales to consumers are down, and there's no point to expanding production or even maintaining the same level of output. The cycle thus feeds on itself and continues downward.
   Austerity by a family or even a household of just one or two persons is justified by its lack of income and fear of worse times to come. A company scales back production as sales decline, justified by the idea that there's no reason to produce if few are buying.
   On a small scale -- an individual household or a single company -- this scenario is appropriate. But on a regional or national scale, this same scenario becomes a self-perpetuating disaster.
   So if consumers and companies cannot or will not spend, boosting the economic lifeblood, that leaves only government -- the third pillar of an economy -- to step in to provide jobs, in turn providing income to workers, who then use that income to buy food, clothing and shelter. Or, succinctly put, your spending is my income, and my spending is another's income. And so the flow goes on, irrigating the economic field and encouraging growth and health.
  But if government also follows the austerity path, even more workers lose their income, which means fewer purchases and lower sales of necessities as well as luxury goods.
   
   So is austerity the answer when hard times hit? For an individual person or a family household, or for a single firm, yes, as long as other workers and companies continue to contribute to the money flow.
   But when government refuses to contribute to the money flow, often through such investments as public works construction of roads and bridges, for example, thus putting people to work so they have money to spend, this can only diminish the money flow, and everyone suffers.
   Worse, when government not only practices austerity itself but also insists that others do the same, the cycle drags everyone down in a depressing economy.

   But a balanced budget is important, and staying within that budget is important, you say. And this is true, especially for individuals, households and single companies.
   It's also true, however, that individuals go into debt to invest in education to increase their skills, and companies go into debt to invest in more production capacity. Likewise, a government can  and should go into debt to provide jobs and income to increase the efficiency of the national system and enable companies and their workers to prosper.
   Then, when the national economy returns to health, government can and should step back, allowing the private sector to thrive on its own.
   
   The current question is whether government spending has crowded out private sector borrowing for production and expansion. One answer is that if the private sector is not producing and expanding, government can and should intervene.
   So far, it seems that the private sector is ready. Almost. However, government must be cautious as it withdraws. To do so precipitously may send the economy over the cliff -- again.

Compromise?

Learn from history. There's no other way.

"That government is best which governs least." -- Henry David Thoreau

   President Obama has offered to compromise as the Republican Party takes full control of Congress. And despite six years of an improving economy, the Radical Righteous still claim that anything and everything Obama does is wrong.
   The unemployment rate nationwide has been cut by nearly half, from above 10 percent to below 6 percent; the federal budget deficit has been steadily declining; the international balance of payments has improved; companies have begun hiring again, and a nationwide health care plan is in place.
   All that aside, things are still bad, goes the mantra, and survival depends on less government. Ideally, none at all. That would mean a return to the 1920s or even earlier, when there were no controls over Wall Street speculators, corporate barons, banking and finance strategists, as well as no Social Security pension plans, unemployment benefits or bank deposit insurance, or even a minimum wage.
   Also, there would be no labor unions to protect the wages, working conditions and civil rights of employees.
   In short, no regulation of anything, in any form, in any area, ever. A totally free, unfettered capitalist system, dominated by a few and detrimental to the many.
   The so-called Gilded Age of the 1890s was indeed a wonderful time, if you were part of the One Percent and all others "knew their place," and dared not try to rise above their class, even in this "Land of Opportunity." (Can you say hypocrisy?)
   
   Tuesday's election results reflected a strong shift to the right among American voters, who have become disillusioned with any idea of progress out of Washington. The most recent session of Congress has passed the fewest number of bills in many years. The Washington Post, citing Pew Research Center data, noted that the 113th Congress (2013-2014) approved just 108 bills of any substance and only 34 "ceremonial" bills, such as naming post offices or honoring anniversaries. That compares with 183 substantive measures and 33 ceremonial bills passed by the 105th Congress in 1997-1998.
   All this even as the GOP lambastes Obama for his failures to accomplish anything. As if reducing unemployment, cutting the deficit, increasing job growth, recovering from the worst economic downturn since the Great Depression, and starting universal health care  don't count.
   
   Midterm elections often reduce the strength of an incumbent President and his party, and this happened again this week to the Democrats. As a result, President Obama says he's "eager to work with Congress over the next two years" to continue the economic progress made since the 2008 crisis. However, "the challenges that lay ahead are far too important to allow partisanship or ideology" to prevent progress.
   Nevertheless, Obama warned that if Congress fails to act, he will, through executive action.
   The conservative wing of the Republican Party seems to believe that the economy has "recovered" and will do nicely if left alone.
   The lesson from history is this: As the economy pulls out of the Great Recession, withdrawing government support efforts may well result in a second downturn, as happened in 1937 during the tough years of the Great Depression.
   Even that bastion of American business, Bloomberg Business Week, has endorsed Keynesian economics and its strategies of government intervention to boost a nation's health. In the current issue, economics editor Peter Coy writes, "The global economy is failing to thrive, and its caretakers are fumbling," and what the world needs now is the stimulus strategies of economist John Maynard Keynes. "The symptoms of the Great Depression are back," Coy writes, "though fortunately on a smaller scale."
   Moreover, calls for reductions in spending are counterproductive, because if everyone does it, nobody benefits, since "your spending is my income," and vice versa, as Nobel Economist Paul Krugman has put it. And on a national level, "a country is not a company."
   In this corner, we noted four years ago that withdrawing support too soon as an economy begins to recover may well happen again, just as it did in 1937.
   Be warned.