Sunday, December 4, 2011

Ever wonder how the Republicans destroyed the economy? Some numbers

It seems a mystery as to why the economy is so sluggish (other than the Republicans like it that way) but there are actual numbers available now to show how they are doing it. First the history: we were really destined to drop into a really serious depression after Reagan's massive tax cuts and the huge downward pressure on wages that he created. The stock market crash and the collapse of commercial real estate after the S&L looting nearly did us in, but Reagan held it all at bay by spending trillions of borrowed dollars. Money borrowed from the very same rich people who were no longer paying taxes, it’s what conservatives like to call “wealth transfer” except when it’s going from the poor and middle class to the already wealthy, then it’s called “fiscal conservatism“.

The reason we didn't have the Republican Great Depression in the 90s was that Allan Greenspan set about creating a series of bubbles: dot com and such crap as that, Clinton raising taxes helped but that wasn’t really enough. Then Greenspan and GW Bush created the housing bubble, Greenspan made the cash available and Bush killed all regulations on lending.

This scheme also took advantage of  so-called investment “deregulation and modernization” done by the Republicans under Bill Clinton’s signature. This allowed them to securitize the debt that was created so that they could bilk investors on the debt itself, and sell derivatives that allowed the banks to bet against their own securities. This wasn't the only thing they were doing but is relevant to this point.

We really need about $18 trillion/year in GDP just to maintain our middle class based economy. Under Bush this was achieved with 14 trillion in actual GDP plus another 4 trillion a year in new consumer debt for an effective $18 trillion GDP. Currently this debt is being de-leveraged (either paid down or defaulted on) at about 2 trillion a year. So instead of an $18 trillion economy we now have a 14 trillion minus 2 trillion or a $12 trillion economy. This is what has created 14 million permanently unemployed people.

This economic strategy works just fine for everybody, except the 99.9% who are screwed. To get the debt down a point where the economy stabilizes at this rate will take about 10 years. This doesn’t take into account anything else the Republicans might do. The austerity they have been pushing at the state and local levels is just making it all worse of course. If they are able to do that at the Federal level things will go down hill fast.

Speaking of things going downhill, the number of students receiving subsidized lunches rose to 21 million last school year from 18 million in 2006-7, a 17 percent increase in the USDA meals program. Eleven states, including Florida, Nevada, New Jersey and Tennessee, had four-year increases of 25 percent or more. Over the previous 30 years as we saw the gradual decline of the middle class, the program had only incremental growth from year to year. These new numbers are only for the last school year ending in June, and don’t reflect the worsening situation this fall.

So even as some Americans go back to work their wages are being cut drastically, and this also cuts into the GDP as 70% of the economy is consumer spending. Traditionally when consumer spending lags, the government steps in to make up the difference. Even in ancient times if there were an excess of beggars outside the castle the king would launch some sort of building project to put coin of the realm into circulation, or just start a war if he was a conservative king.

We are currently in the midst of a war with a slight twist, I mean besides the ones overseas. The rich are making war on the rest of us to loot and pillage the wealth of 99.9%. We were supposed to be distracted by the endless war on Terror but people are starting to notice. The Republicans think it might work for them to start a war with Iran to keep us busy, “we’ve always been at war with South Asia”.  www.prairie2.com

8 comments:

Anonymous said...

"To get the debt down a point where the economy stabilizes at this rate will take about 10 years." Not sure I really want to know what America's future stable economy might look like if all goes 'well', but what is your prediction?

Side thought: As no one was held accountable for having stolen bigtime so far, what will stop them from stealing even bigger in the future?

Tom in Oregon

prairie2 said...

The ten years is just a number, the criminal conspiracy that caused this isn't done with us. The only thing that will change things is for enough people to know what's been going on.

Anonymous said...

10 years? Hows japans economy by the way.

prairie2 said...

"hows japan's economy..." I don't know what you're trying to say. In case you didn't get it, "ten years" in just a number based on the current insanity, and meaningless in reality.

Anonymous said...

What I'm trying to say is the debt
has been a drag on japans economy for over 20 years.Until we stop treating debt as a asset nothing will change .

Leftie said...

Great analysis! If, according to history, most societies have been ruled and controlled by the wealthy, and America's middle class was an unusual and short occurrence, why should we be hopeful that more people will know the truth about our economy and political process? When we have a gigantic right-wing propaganda machine that fills so many households with misinformation and a populace that is more concerned about Kim Kardashian than corporate personhood or tax rates why should we expect that we will have a return to policies that will promote the resurgence of a thriving middle class? Any optimism would be appreciated.

fype said...

P2,
You touched on something which has always intrigued me. If 70% of the US economy consists of personal consumption, Where Are The Consumer Advocates? At very least, there should be a cottage industry dedicated to stopping the overt fraud. Or some other effective recourse for victims.
I never liked Elliot (Client 9) because of his penchant for selective prosecution. At least he prosecuted SOMEBODY! And maybe he was benched because he was going after one or two sacred cows. Be well, P2!

Anonymous said...

Clink-clank-clunk, the sound from the inside of my head after reading this blog. Dang I've read this a half dozen times taking it in, my hat's off to you for another fine blog entry!
The jobless in the economic circle jerk cannot do the reach around to continue the chain. They are not inputting a larger earned check compared to an unemployment (subsidized by the goooberment)to satisfy the next participant in the transaction,(cashing a check-making necessary purchases and impulsive purchases)verses just minimalist purchases. Herein lies the RUB (he-he-he) de goobemint indeed rubs up a debt to keep money flowing- a good thing at a cost(bad thing-cheap t bills and all them derivatives and credit default swaps and untaxed borrowing against them capital gains and all that other shenanigans that the super duper richy rich rich get to play with whilst they hide the funds offshore after little to no taxes paid on the privilege of acquiring all dat and den sum-whoop whoop! I feel like I'm parroting what you've all ready said Hmmm. Back on track, debt for you and I little people is a vastly different thing thing than debt for our big ol goobermint. Debt for us can spell the end of one lifestyle and the beginning of another lifestyle, shhhh, I can hear you saying DAA! But that can be revitalizing vision to get us individuals back on track to what is important and affordable to live within our means-the skools should teach that among other things.
The idea of government and its running a debt is a specious argument. Gooberment is the lubricant of the circle jerk-oops I mean the foundation for a stable or unstable economy. Take your pick-by the santorums(talking splat heads on TV) you elect. Some good hard a$$ pounding(taxes and regulation of finacial and investment manipulators and venturists like in England that regulate purchase and divestment) on those massive accumulators of all the wealth is not an excessive tax, it is just recouping the cost of creating a civil society that the richy rich rich as well as us little people can participate in the the American dream I seem to recall of the 70's verses the circle jerk of what is happening today. Just go back to some regulations and pre-raygun tax levels for richy rich rich and poof I thinks all that "debt" will become revenue and all that wealth transfer will go back into the circle jerk rather some frothy splats assets accumulation. Just sayin?!...
you too, right winger will benefit..........