I’m sitting in the park on the Manhattan side of the Williamsburg Bridge. It’s a pleasant summer afternoon, I’ve been riding my bike, and the endorphins are flowing: it’s all good.
When I was a kid, I lived near here, and my parents and I would go out on our bikes on Sunday morning. It’s good to see that the park is, if anything, a little nicer than I remember it.
It’s been a crazy week with the alleged resolution of the debt brouhaha:
- Each side is now yowling that it was taken advantage of by the other. Obama sold out to the Tea Party, while the Tea Partiers wimped out.
- On Wednesday, the government borrowed nearly a quarter of a trillion dollars, apparently making up for lost time.
- Some Republican (mainstream, not Tea Party) noted that the GOP was more than willing to let the deadline pass, until they considered that the Treasury, having to prioritize spending, would short the things that would make the public the angriest (like Social Security) so that they could blame the Republicans. I find it hard to believe that the Obama administration would do that, but I suspect that a Republican administration would.
- After a 500-point drop on Thursday, the stock market had a barf-bag day on Friday.
- On Friday afternoon, after the markets closed, Standard and Poor’s downgraded US government debt from AAA to AA+.
But where does that leave us as far as the rest of the economy? Sadly, not too well. But that’s not really new.
The national government is a one-trick pony: there is only one thing it can do to address a sluggish economy: deficit spending. Whether this takes the form of tax cuts or new spending programs, the goal is the same: provide loose money to encourage commerce and tide people over until new growth takes hold.
But in fact, the government spigot has been stuck on ‘loose’ for many years now. Between the bailouts, the stimulus, tax cuts, and the Federal Reserve’s quantitative easing, we’ve delivered enough stimulation to launch the Empire State Building into orbit. It hasn’t worked.
Now is the time to re-examine our premises and seek a new way forward. It won’t be easy, and some of it will certainly be painful, but it’s still better than the alternative of yet more debt.