The rhetoric that accompanied Obama’s election included much from the downsized Republicans about looking forward to working with the new president and coming to grips with national problems in the spirit of a fresh start. However, the stimulus package—which may well be too big—has forced the Republicans to declare themselves. We’re hearing a lot about wanting more tax cuts—almost exclusively tax cuts—in lieu of spending in the form of direct aid. This is a Republican mantra now. Tax cuts. The question, of course, is really this: what good are tax cuts when you’re already buried in debt? Granted, it frees up (theoretically) money for critical and immediate payments, but if the idea is to put people back to work tax cuts are not the solution. Because corporate America is mired in over-leveraged debt burdens that must be paid down before something mundane like hiring can happen. Tax cuts, therefore, won’t have any kind of immediate impact on the jobless rate.
In time it might, depending on several other factors, the most significant of which would be a newfound corporate sense of ethics which would prevent them from continuing the pillage of their own capital for all the things that have gotten us into this mess in the first place. Labor is at the bottom of the ladder of what they see as important—hence the tongue lashing Obama gave them
for paying out bonuses while asking for federal aid. As for working people? What good does a tax cut do someone who isn’t paying taxes because he or she has no income?
But this was to be expected. It is an attitude born out of the mixed priorities of what has become the Right, one of which is fiscal responsibility (I used to support Republicans on this count) the other of which is the more Libertarian view (borne of the Grover Norquist faction) that government is always the problem and must be pruned back radically. Hence tax cuts, in order to curtail revenues in order to force the government to reduce its size and, one must realize, its influence.
This was to be expected, though. They have to stick by their perceived brief in the hope that not all of their program of the last eight (or twenty-eight) years was rejected by the part of their constituency who switched parties to vote in Obama and Democratic majorities in both Houses.
But now we have a fairly clear statement that these folks are a new form of Ostrich. Obama made it clear during the campaign and since taking office that he intends to put science back in the forefront of our national life. The steady erosion of science by continual right wing gnawing since Reagan took office has left us in a bad state in relation to the rest of the world in terms even hard core Republicans must grasp—competitiveness. The canceling of the Super Colider in Texas was bad enough, but we’ve seen all manner of sidelining of science, most especially during the Bush years, most prominently (but not exclusively) with regards to environmental science. Basic research is down, exploratory science is struggling. While the late and (by many) unlamented Senator Proxmire did inestimable damage to science by making it the object of ridicule and derision, the fact is that during the Fifties, Sixties, and good part of the Seventies it had been because of our national investment in Pure Research that America ended up at the vanguard of science. The payback from NASA’s Apollo program alone in areas as disparate as meteorology and medical technology is almost incalculable.
What characterized this was the willingness to take risks. Let scientists research what they would on the assumption that somewhere along the line something would emerge that would benefit everyone. It was a gamble, but of a win-win vareity. Things did result, technologies and fundamental insights that propelled our education, our understanding and, yes, our economy in ways that could not have been predicted.
The unpredictable nature of it drives certain types of people insane.
Reagan’s assumption when he took office was that if we cut out the government involvement in—well, in anything—then the private sector would move in and take up the slack. Nice idea and on paper there was nothing wrong with it, except it didn’t happen. (Personally, I think Reagan was one of our most gullible presidents—big business told him “Ronny, take the restraints off and we will make this counrty great, we will be responsible corporate citizens, we’ll do great things for America” and he believed them. (Top be fair, in some cases those corporate entities probably did do their best, but most just entered upon the feeding frenzy deregulation permitted and we’re paying for it now.) Reagan believed them and they took what he gave them and screwed the country. In terms of fundamental scientific research, corporate spending on it declined fairly steadily since them. (One of the most productive research facilities in history, Bell Labs, is pulling out of basic research (an announcement made in August 2008) after years of declining funding which left only four scientists in the institution doing any kind of pure science.) Corporate America cannot stand paying for gambles, even when historically this gamble pays off magnificently. (The shareholders would rather have the money in their dividend checks.)
So when Obama declared a recommitment to science, given his otherwise pragmatic vision, it was clear that he understood that in order for there to be a future, we have to look for one. And to look for it in such a way that it will benefit us as we go.
The stimulus package included a great deal of money—minuscule compared to the overall amount—for the various science departments which have been all but strangled over the last decade. According to this link through Panda’s Thumb, Republicans want to cut deeply into science.
The most egregious cut in this list in the excision a billion dollars—the whole stimulus allocation—for the Nation Science Foundation. But nothing is left untouched.
The most obvious conclusion to draw, as if that had not already become clear from all the other wrangling over this, is that the Republican leadership simply doesn’t get it, that they don’t see the connection between the free and subsidized exploration of all those things coming under the heading “Science” and the growth of both economic prosperity and the human spirit.
A less obvious conclusion, and perhaps a bit on the fringe of reasonable, is that Republicans, conjoined as they are to elements in our society which have for lo these many years done everything possible to destroy our confidence in science and our attachment to its products, both intellectual and material, cannot countenance increased support of the very institutions whose pronouncements they have denied and thwarted at every turn. It is disconcerting to see such a thorough-going denial of investment in the very fields that might—will probably, in fact almost certainly given its track record—do the most to improve our future.
But it is the future that is the enemy. It is the certainty that it will be different and that we must change in order to live in it that disturbs what has become a large segment of the Republican Party’s natural constituency. It is a denial of all that we must face and, more importantly, all that we must embrace in order to become what we’ve been declaring since WWII that we are—the bright beacon of freedom in the world.
The spending on infrastructure, on schools, on basic support mechanisms is being condemned by Republicans as unnecessary spending, because it is not stimulatory. But everyone will use those things and because they won’t have to rely on some private entity to do or not do them depending on the whims of the shareholders they will be there for everyone to take advantage of. (The interstate highway system enable a huge spurt of economic growth once it was constructed. The benefits to transportation allowed business to increase profits. True, it also enable White Flight and has created the problem of Suburban and Exurban sprawl, but that too was a spur to economic growth. Yet critics at the time saw it as “wasteful” spending.)
There is a link in the article to the legislators who are part of this demand to shut down a potential road to a better future. Perhaps we should gear up now to see that they are ousted in the next election cycle.
But then, maybe you think all this money for basic science is a bad idea, too. After all, science is all about the future and the world and the universe and tells us things that make us different. Scary.
And exciting.
From the standpoint of injecting money into the economy, there is no significant difference between the government spending money on direct payments or spending money on tax cuts. If the government spends $1 directly, or foregoes $1 in tax revenue, either way it is essentially giving $1 to someone, so the net result on the economy will be the same. Therefore, to suggest that tax cuts "stimulate" the economy more than direct spending is absurd — and so is the reverse claim. What actually matters is: (a) who gets the money and (b) what does the money buy.
Who gets the money doesn't change the amount that the economy is "stimulated," it merely changes who gets wealthier. Republicans want rich people to get wealthier. Therefore, they seek only tax cuts, because rich people, who pay most of the taxes, are the main beneficiaries of any tax cuts. (In an economy with a progressive tax policy, tax cuts are regressive.)
What really matters, from the point of view of "stimulating" the economy, is what the money buys. Money can be spent one of two ways: consumption or investment. Spending money on consumption (say, paying your army to invade a small Middle East country) is mostly money down the drain. Yes, it injects money into the economy, and that money will circulate from one person to the next, but there is no significant *improvement* to the overall economy — the nation's infrastructure remains just as inefficient as it was before. It's like when you spend your own money on consumption (food, clothes, a plasma TV, etc.): yes, you enjoy a short-term benefit, but your income…your standard of living…doesn't go up. By contrast, money spent on investment *can* make improvements to the economy. Just like investing in your education, your business, your own personal infrastructure, etc., government spending that represents an investment in future returns is what can actually turn an economy around. Spending money to make the nation more competitive will have a far greater "stimulus" to the economy than spending money to buy consumables.
In other words, the real issue for "stimulating" the economy is not whether Congress passes tax cuts or direct spending. What matters is whether the tax cuts or direct spending wind up supporting consumption or investment. If tax cuts are not just blind give-backs to the wealthy, but instead are targeted to support sensible investments (e.g., home weatherization, fuel-efficient cars, better Internet infrastructure, etc.), then tax cuts can be a good way to "stimulate" an economy, because they actually can result in a more competitive nation. Likewise, direct payments that represent investments for future returns (e.g., guaranteed student loans, public works projects for better roads and bridges, public health improvements, etc.,) can also be a good way to stimulate an economy. Conversely, if tax cuts or direct spending merely support more consumption, then any short-term bump up in the economy will soon disappear.
I ran across this extraordinarily dark post that described, in captivating detail, how one guy and his family have coped since the 2002 collapse of the economy of Argentina. Truly bleak stuff. In 2002, Argentina had defaulted on its debt, its GDP had shrunk, unemployment reached 25% and the peso had depreciated 70% after being devalued and floated. Not that the U.S. is Argentina. But we have a higher standard of living, and that might make it even more difficult to survive the effects of economic collapse than people who were already living simpler lives.
I am posting this link in that it puts in perspective the potential danger of what we are dealing with when we see unrelenting signs of a U.S. economic collapse. We also see the lead economists looking incredibly unsure of what they are attempting to do. Spend more money we don't have? Great idea, right? Or cut taxes more to mushroom long-term debt? It's just it was during the invasion of Iraq in that you just don't hear politicians sternly telling Americans that they need to make any sacrifices. No one is telling Americans now that they need to make some adjustments to their lives to live within their means.
As I suggested, maybe the U.S. won't suffer like Argentina, but the stakes here are undoubtedly high, too high for the two major parties to be bickering rather than communicating the risk to ordinary Americans. The risks are too high for our leaders to be sugar-coating the problem by pretending that the government can solve this problem by pretending to hemorrhage money it doesn't have.
All this is happening at a time when there are numerous other issues working against us. Demographics (our aging population that will attempt to draw extremely heavily on resources that we can't afford –the expanded Medicare benefits); the monumental energy crisis; soil degradation; and yes, the long-standing Republican war against science.
We have stupidly put ourselves in a danger 10 times bigger than anything the terrorists could have ever threatened. Really, what can you say about a country facing vast dangers where the Politicians won't candidly talk with each other or with the citizens? What can you say about a country where most of the leaders have refused to plan ahead more than a year or two (and they've done even that poorly)?
Grumpy,
There are two major differences between tax cuts and direct spending that are vital to this situation. The first is, with regards to individuals, is timing. Tax cuts take time to have a net effect. If you need money NOW, you can't wait. If you're talking about corporate tax cuts, that won't help individuals who have lost their job as the extra income will go into debt relief, not new hiring.
Which leads to the second major factor: quid pro quo. Tax cuts give governments agencies zero leverage in setting any kind of standards for corporate good behavior. Direct relief does. It can make a hell of a difference.