The Titanic Budget Battle

As the fur flies in Washington this week, I think it’s appropriate to take the time to remind my readers that, regardless of which way this fight turns out, it won’t make a damn bit of difference for the future of this country.  It can’t because it does nothing to address the two issues that have ravaged our economy:  worsening overpopulation and the effects of trading freely with other nations that are even more, much more, overpopulated. 

It’s like two committees formed on the Titanic to solve the problem of rising water.  The approach of one committee, the Democrats, is to put every passenger to work hauling lumber from the carpenter’s shop and building additional decks to keep everyone’s head above water as the lower decks disappear.  Never once do they consider that there isn’t enough lumber to keep building decks until the ship has sunk to the bottom.

Then there’s the Republican committee.  They’ve decided that the solution is to jettison passengers, lightening the load to keep the ship afloat a little longer, giving the poorest of the passengers the heave-ho first. 

All the while, water gushes in through the breach in the hull.  It never seems to dawn on anyone to plug the hole.  Or if it has, no one is willing to go below, get their feet wet and do some dirty work. 

And so it is with our economy.  The Democrats’ approach will work for a while:  just throw money at the problem.  Things will be fine for a while, until we drown in debt.  If the Republicans can be believed (a stretch, given what happened to the debt the last time they had anything to say about it), they can prevent the debt problem if we just throw some people under the bus and hope no one notices, or that no more than 50% of voters care.

The reasons for our budget deficit, now estimated at about $1.6 trillion per year, are no mystery.  First of all, there’s all the unfunded Middle East wars.  Secondly, there’s the stimulus spending to piece back together the economy following the financial collapse (a direct result of our $10 trillion, 3-decades-long trade deficit).  And then there’s the social safety net spending to offset the ongoing effects of the trade deficit and the loss of millions of manufacturing jobs. 

The spending on the wars is taking care of itself as first the Iraq war, followed by Afghanistan, are being wound down, though given the recent bombing of Libya, one has to wonder if anything has been learned. 

The trade deficit and loss of manufacturing jobs is another matter.  The Democrats’ approach is to throw money at the unemployed and at everyone else whose wages and benefits are now in decline as our over-supply of labor grows ever more out of balance with the demand.  Truth be told, the Republicans’ approach while they were in power was little different.  But now we’re to believe that in Reagan-era style, their solution is to cut taxes, slash spending, and let the trickle-down put everyone back to work. 

This isn’t 1980, when stimulus spending in the form of tax cuts was spent on products still made in America and the trickle-down effect actually worked.  Our manufacturing base is gone and “trickle-out” has replaced trickle-down.  The economies of China, Japan and Germany get all the stimulus while all we get is debt piled onto our future generations.  And, come on, does anyone believe that the voting electorate will tolerate the poor being turned away from hospitals because the fixed lump sum allocated to Medicaid has been exhausted?  A budget is one thing, looking so good when the votes are cast.  Sticking to it is an entirely different matter.

What really ails this economy is the steady loss of our manufacturing base and millions of manufacturing jobs (not to mention millions more in supporting them) since our last trade surplus in 1975.  At least the administration seems to have finally come to that realization.  Give them credit for that much.  But all of the spending and tax cuts in the world won’t have one iota of impact on changing that situation.  Neither will Obama’s efforts to boost exports of the few products we do still make – mostly machinery used by foreign manufacturers to boost their capacity to drown us in even more imports. 

We’ve got to start making every product that we consume.  We’ve got to build and start up factories to produce iphones, ipads, laptops, appliances, clothing and every other product you find on the shelves at the big box stores.  There is only one way to make that happen and that’s to impose tariffs on the importation of those products.  If you were a manufacturer in such an environment, would you continue to make your products in China, only to have all your profit and more eaten up by tariffs?  Or would you bring your plant back to the U.S. where it would be tariff-free? 

Don’t worry, consumers.  Sure, your prices will go up.  But let’s not forget that you’re also workers, whose wages and benefits will be driven up even faster by a high demand for labor.  That’s how the economy worked – how America built itself into the world’s preeminent industrial power – before we pulled the trigger on free trade, not realizing that the barrel was pointed in the wrong direction.

Finally, let’s not forget the role of home-grown overpopulation in driving up spending on social safety net programs.  For all the talk about how we need talented immigrants to drive our economy forward, the facts tell a different story.  As population growth and over-crowding erode our per capita consumption, each new immigrant only adds to a labor pool already out-of-whack with the demand for labor.  It doesn’t matter whether the immigrant is illegal or legal.  Unless that immigrant brings with him or her an ability to consume products that outstrips his or her productive capacity, unemployment will worsen and, with it, poverty and social safety net spending to offset it. 

The budget battle playing out in Washington is like the band playing on deck, distracting our attention from the water rising around our ankles.  Just pass a damn budget already and turn your attention to something that really matters, like fixing our idiotic trade and immigration policies.

3 Responses to The Titanic Budget Battle

  1. Ken Hoop says:

    Have you commented on Trump and his Chinese tarrif proposals increasing his popularity among voters?

  2. […] to the need to deal with our trade and population (primarily immigration) issues.  It was only earlier this month that I said exactly what Ms. Freeland said – that the budget and debt battles pale in […]

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