Saturday, April 07, 2012

Kelly wants the poor and unemployed to suffer

I have said before, Jack Kelly is no economist. Today, he is toeing the Tea Party line about government spending, even to the point of questioning Paul Ryan's conservative credentials, based on the budget the House just passed. Kelly goes so far as to suggest (without attribution to any source) "Trouble starts with sluggish growth, but ends typically with a spectacular crash, hyperinflation and depression". I'm surprised he didn't mention frogs and boils.

Kelly simply makes statements like that throughout his column, lumping together unemployment, slow growth and high gas prices and blaming "chiefly" the government. Since government measures show inflation at no more than 2.9 percent, Kelly references the American Institute for Economic Research which has it's own ""Everyday Price Index"" that says inflation "rose 7.2 percent" (a year, a month; Kelly doesn't say). If what the government says is inconvenient, find someone who says the right things

By the way, Kelly has referenced the American Institute for Economic Research previously. It is described on the internet as centrist, but there are indications of an agenda (involving George Mason University?!).

Kelly keeps on in this vein, quoting Republican donor Ray Dalio among others or making his own interesting assertions: "The nations which recover fastest after a crash are those which sharply restrict government interference in the economy. The "economic miracle" in post-WWII Germany is the most spectacular example, but history is replete with others." I don't know what the government of post-WWII Germany did, but I have to wonder if Jack Kelly has heard of the Marshall Plan?

Kelly's grasp of economics is pretty clearly murky at best. He is trying to appeal to "common sense", that running deficits is not sustainable, that government regulations - rules of behavior, are ruining the free market and thus causing the slowdown and our current massive unemployment. He simply ignores the housing bubble, the incredible fraud amoung financial institutions - a willful blindness. He has no idea what following his advice would actually achieve/cause.

But further there is the sheer meanness of what he proposes. As I said earlier, Kelly apparently can't support the Ryan budget "Yet when times are tough, few propose that government tighten its belt. The budget that House Republicans passed last week is "thinly veiled social Darwinism," Mr. Obama said. But even under the GOP budget, federal spending rises year after year.".

The Ryan budget in fact (vaguely) reduces government spending across the board, including "reforming" Medicare by giving senior citizens a voucher for private care. When that program was attempted during the Bush administration, it consistently lost money (the government had to give the private insurance companies more and more money). The reason the Ryan budget still grows the deficit is that the Ryan budget actually forces the defense department to accept more money than was planned in the event Congress couldn't agree to a budget (at least for next year). Kelly apparently wants defense at least not to grow, if not shrink.

Make no mistake, though, Paul Ryan, Jack Kelly and the rest of Republicans, conservatives and the Tea Party wants domestic spending to largely disappear. Unemployment compensation, aid to families with dependent children, Child's health program, aid to public schools, basic research in health (the National Institutes of Health), aid to poor students to go to higher education of any kind, Mediciad ... all on the chopping block. Think about what the country would look like if we ended unemployment compensation; according to Republicans more American would find jobs, and possibly some few would accept huge cuts in pay, taking a job as a McDonalds fry cook after having made cars. But there are only so many McDonalds jobs, let alone good paying jobs that companies seem to have but don't offer to those who are currently unemployed. Further the ones who didn't find a job before their retirement savings (their dreams for the future) run out, who still can't make ends meet or don't have savings, they would end up perhaps on the street. The country would not have the benefit of the spending fueled by unemployment compensation - the foreclosures our neighbors would suffer and the sales at mostly grocery stores.

Which brings me to my final point (I know, finally). Just before throwing Ryan under the bus, Kelly says "The federal government will spend about 31 percent more in the current fiscal year than was spent in 2008. The president's cronies will benefit. Most Americans won't.". What goes into current federal spending? Is some significant fraction money flowing to liberal-owned solar power companies, like Kelly would like you to think? Not so far as I can see. But what is different between 2008 and the current year. Well, the stock market crashed in the fall of 2008, but the real effects of that did not really hit until Obama took office in 2009. Since then, some say "automatic stabilizers" such as unemployment compensation and food stamps are the biggest part of the what (actually smaller) increase in federal spending has occurred. This as unemployment went from 5% in January of 2008 to near ten percent in January of 2010.

Without this spending, those who were unemployed would have had suffered so much more. The rest of us would not have had the benefit of their spending. Essentially the country would have slipped into a full blown depression. Period. And Jack Kelly's blathering can't change that. The 2009 stimulus was too small, the result of Obama trying to accommodate Republican concerns. But without it and the automatic spending on unemployment compensation and other programs for the newly poor, this would be 1932.

(by the way, state and local spending, especially in Republican controlled states, has contracted, threatening our fragile recovery).

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