When Will Wall Street Call for More Federal Spending?

cut taxesThe Dow Jones Industrial Average dropped another 3 percent today as Wall Street metabolized the truth most Americans already know: We’re in a recession. The “double dip” has arrived.

Most Americans never really emerged from the Great Recession anyway.

We can get out of this recession but not via the Fed’s “quantitative easing” alone. When consumers can’t spend and businesses won’t spend without additional consumers, government must be the spender of last resort.

Juicing the economy back to health (notice I didn’t use the “s” word Republicans have now vilified) will require at least $700 billion in additional federal spending this year and next. (This number takes account of state and local government cutbacks as well as well as the current shortfall between current economic activity and the economy’s productive capacity at or near full employment.)

But this magnitude of additional spending isn’t feasible in the face of Tea Party Republican intransigence. Hell, Republicans won’t even spend additional money on flood and hurricane relief. The Tea Party obsession about the federal deficit and the size of the government is prevailing.

Not only is this obsession keeping millions of Americans out of work, it’s also starting to bring down the Street.

If this keeps up, we’ll have a showdown between establishment Republicans who understand what must be done — and who will support substantially more federal spending in the short term in order to goose the economy — and Tea Party zealots who refuse to face reality.

Robert ReichThe crack in the Republican Party between its establishment and Tea Party wings is viewed politically as a contest between Mitt Romney and Rick Perry. But in reality it’s a brewing fight between economic pragmatists and right-wing ideologues. (Don’t expect Romney to call for more government spending, at least before the Republican nomination.)

The titans of Wall Street may not want to Barack Obama reelected, but the Street has an even greater interest in saving its assets and its ass.

Robert Reich
Robert Reich’s Blog

Comments

  1. Ryder says

    Another amazing piece by Bob… amazing that he is stuck in this Keynesian rut… and the fact that even after administering the Keynesian prescription once already, we are heading into the double dip that everyone else knew was coming. Only the Keynesians didn’t know it was coming, but are the first in line to call for more failed stimulus so that they can grow government even larger, and keep us in a depression.

    The reason you have decided to NOT say “stimulate” isn’t because the method has been vilified, it’s because it failed. If you are looking at doing the same thing as before, and are expecting a different result, well, we all know what that means.

    As part of the JFK School of Government, you should know (but certainly never advertise) that Kennedy himself said plainly that cutting taxes raises revenues, and indeed, cutting taxes has a known history of doing just that.

    Doctors tell us to not do anything too taxing on ourselves when we are sick so that we can recover. Why do they say that? Because they understand working systems. When you BURDEN a system, it slows down, like an overloaded donkey, or the human body when asked to deliver more than it can.

    You can’t tax your way into prosperity.

    When Washington collects a massive pile of money to spend, who do you think shows up to take the handouts? A bunch of Saints? Give Me A Break. Those first in line are the crooks and the cronies… the politically connected… they get their chunk of cash, and then waste it. How many Solyndras can we take?

    On the other hand, are you saying that if we stopped taxing the American people, that they wouldn’t spend the money they were allowed to keep?

    That’s insane. Americans can’t wait to spend their money. We save less than almost anyone on the planet. Claiming the opposite so that you can suggest that the government should be the “spender” of last resort is just an attempt to, once again, promote a bigger and more powerful government.

    Why don’t you big government types just go away? Haven’t you done enough already? Governments around the globe are broke and are going down in flames. Their credit scores are in the tank.

    We were told that we couldn’t be trusted to save for our own retirements, so social security would have to do it for us… forcibly taking our money to “save” it for us… except you big government types didn’t do that. You proved to be more irresponsible than anybody and SPENT IT ALL. You never saved it. Not one thin dime.

    Nobody should listen to your big ideas. Ever.

    • MyLeftMind says

      Tax ourselves into prosperity? Of course we can. The whole point of taxes is for all of us to combine resources so we can create the infrastructure and environment that is conducive to our needs and our growth. The problem is that corporate America has bought off our politicians, so most of the benefits that come from pooling our common resources is being drained away by the super rich. Meanwhile, the left wing has created non-productive, intergenerational welfare programs that sap our country from the other end. Granted, there’s nothing wrong with a wealthy nation ensuring that everyone is fed and housed, but the way liberals have set up welfare programs, we’re encouraging people to have a bunch of babies and sit on their butts instead of getting a job. Our so called “safety net” programs have turned into social support systems that encourage a poverty lifestyle. In many cases, they just encourage people to have babies so they can receive more public benefits. Add to that some 20 million illegal aliens stealing our resources, and no wonder the Republican Party still draws converts.

      Right now the rich aren’t taxed enough, and the poor have learned to sit around sucking off the working and middle classes. Both parties fund corporate welfare, but the Democrats also create public policy that encourages people to NOT take financial responsibility for themselves and their kids. Meanwhile, the Republicans can pay back their corporate owners with huge tax breaks because the common American is fed up with naïve liberals giving their money away to freeloaders.

      The end result is that working Americans vacillate between the two political parties, neither of which intends to keep us around much longer.

      Everyone should be listening to people like Robert Reich, because he’s spot on with his analysis of the corporate takeover of our government. Sooner or later he’s going to also figure out that we need to recreate the social safety net as well, because working Americans will continue to vote republican while Democrats allow so many, many cheaters refuse to take responsibility for their lives and to suck off our resources.

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