McCain advocates tax cuts for parents and corporations and mortgage relief for distressed homeowners, paid for by pairing non-defense, discretionary government spending and higher Medicare premiums for the well off. Cutting taxes and government outlays together won’t boost spending for U.S. made goods, increase traffic at restaurants and dry cleaners, put unemployed back to work or resurrect growth.
Neither would a stronger stimulus package, because the economic quagmire is not a 1950s-style recession, caused by a temporary buildup of unsold goods precipitating shorter shifts and layoffs. Rather, it is caused by systemic malfunctions, created by wrong-headed energy, trade, and banking policies, that won’t easily be resolved.
In 2008, net petroleum imports will likely cost $400 billion, up nearly ten fold since Bill Clinton took office. Many oil dollars sent to Arabia, Russia, and other “friendly” places are not spent on American goods and do not create jobs here. Rising gasoline, electricity and heating bills – coupled with booming prices for food, give Americans less and less to spend on nonessentials, and retail sales sink, layoffs mount, and wages falter.
U.S. exports have not kept pace to pay for oil and the other goods we buy abroad. Since Bill Clinton took office exports have increased about $1.1 trillion, while imports have jumped $1.7 trillion. The overall result is a whopping $700 billion dollar trade gap that reduces GDP by $250 billion and longer-term economic growth by even more.Americans use too much gasoline, and the ethanol program dents the problem much less than it pushes up prices for butter, baked goods, and beef, and instigates food shortages in poor countries. Ethanol is the sophistry begotten by pandering for farm votes. The real answer lies in more fuel efficient vehicles manufactured with readily available and reasonably obtainable technologies, already within our reach.
Sadly, hardly anyone in Washington – including the trio of Senators running for President – seems willing to embrace truly rapid deployment of hybrids, lighter vehicles, fuels cells, and more efficient diesel and gasoline engines. Our free trade policies would raise productivity and living standards if we paid for what we buy abroad with exports, because exporting industries use labor more productively and spend more R&D. However, governments in China, Japan, and much of Asia intervene in foreign exchange markets to keep their currencies artificially cheap and U.S. exports too expensive in rich markets with the greatest untapped opportunities.
McCain, Clinton, and Obama all refuse to back bills pending in Congress that would get tough with Asian currency manipulation, and establish conditions for more balanced trade with those protectionist regimes.
The presidential contenders, all busy harvesting contributions in New York’s financial district, have not explained what they plan that would fix that mess. On important energy, trade and banking issues, McCain offers Bush redux. Clinton’s platform is a throwback to 1970s French statism, something President Sarkozy is trying to escape. Obama is offering what he does best – an Elmer Gantry campaign, full of expressions of hope, but thin on policy and anything truly new.
It seems elephants have long memories, but few new ideas. Donkeys are endearing, but even less adaptive.
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