There’s Plenty of Money Around. Let’s Take It.

What’s the difference between you and a corpse? You both contain the same organs, the same fluids–all the same stuff. Inside you, stuff moves around. That’s the difference between life and death.

What’s the difference between economic boom and bust? Again: movement. The United States of America is just as rich today as it was a year or, for that matter, ten years ago. It still possesses the same rich natural resources, the same enviable geography, and the same productive, innovative and energetic workforce. Our country still has enormous intrinsic value. But money, the lifeblood of any economy, has stopped moving around.

Wealth is still here. But the economy has flat-lined.

We know what caused the problem–the double bursting of the dot-com and housing bubbles, coupled with government regulators who took the last three decades off from work and financial analysts who said the old rules no longer applied. (The old rules always apply.) The underlying meta causes of the Crash of ’08 were an unholy trinity of stagnating wages, easy credit and brilliantly executed consumer propaganda that convinced people they were lame unless they bought all the latest stuff. But that’s a discussion for another time. This week, let’s think about how to escape the deflationary spiral that will reduce the world’s richest nation to penury unless something is done soon.

The Fed, having reduced interest rates to zero, is out of ammo. Banks are using the $700 billion bailout to buy each other up, enriching only themselves and a few hundred investment bankers. (In all fairness, Treasury Secretary Henry Paulson told them to do just that.)

President-Elect Obama’s plan blends George W. Bush and FDR’s greatest hits: a symbolic Bush-style tax cut of $500 per person ($1,000 per couple) and a $850 billion infrastructure construction bonanza reminiscent of the WPA projects of the 1930s. Obama’s tax cut won’t stimulate the economy; they never do. Due to the “multiplier effect,” Obama’s economists predict that his public works projects will create 3.2 million new jobs by the first quarter of 2011. “Peter Morici, economist at the University of Maryland, projects that $100 spent on a bridge or school boosts economic activity by about $200,” reports the Associated Press. (That doesn’t count the benefit of improving Americans’ longer-term productivity. For instance, better roads could reduce commuting times or help get goods to customers more efficiently.)”

A public works program is a good idea. But Obama’s plan won’t be enough to put a dent in the skyrocketing unemployment rate. 3.2 million jobs would be barely enough to replace six months worth of job losses at current rates. And most analysts think those rates will rise. With the federal budget continuing to sink $9 billion a month into the fiscal sinkhole of Iraq, there isn’t much cash to make the plan bigger.

“With negative or low economic growth projected well into the future, the economy needs a long-term fix,” says Stanford economist John Taylor, who worked in Bush’s Treasury Department. Definitely. But what?

Unless something big happens (like every pundit, I should predicate every prognostication with the acronym USH for “unless something happens”), the depression will deepen quickly. Our economy is two-thirds dependent on consumer spending, but consumers are stone cold broke. Decades of attacks on labor and free trade agreements caused wages to stagnate as inflation raged, so Americans have no savings to draw upon. Credit is no longer available as a back-up.

The American consumer has left the building.

Demand will keep shrinking, forcing companies to lay more people off, which will accelerate the shrinkage of their customer bases. Prices will drop to chase the few dollars left in the economy, triggering deflation. It’s already begun: Prices fell 1.7 percent in November (20 percent on an annualized basis). Debtors will try to pay off inflated credit card bills and mortgages with deflated money. They will fail. Misery will spread.

What happens next, I think, is that people will do what large numbers of people always do when they need money and food but can’t find a job. They will start to think about the rich, who still have all the wealth they accumulated while money was still circulating. And they will take it from them. It might be the easy way, through liberal-style income redistribution. Or it might be the hard way. Either way, it goes against the laws of nature to expect starving people to allow a few individuals to sit on vast aggregations of wealth.

When I was young, I assumed that revolutions resulted from ideology, because idealists wanted a fairer world. Now, as we stare down the barrel of economic apocalypse, I realize that they’re carried out by desperate people who have nothing to lose, in Marx’s words, and everything to gain. They take stuff from the rich and write the ideological tracts after the fact.

With the economic distress we’re likely to see in the coming year or two or three, revolution will become increasingly likely unless money starts coursing through the nation’s economic veins, and soon. Will it be a soft revolution of government-mandated wealth distribution through radical changes in the tax structure and the construction of a European-style safety net, as master reformer FDR presided over when he saved capitalism from itself? Or will the coming revolution be something harder and bloodier, like the socioeconomic collapse that destroyed Russia after the fall of the Soviet Union? To a great extent, what happens next will depend on how Barack Obama proceeds in his first weeks as president.

(Ted Rall is the author of the seminal Generation X manifesto “Revenge of the Latchkey Kids” and a former loan officer for The Industrial Bank of Japan. He draws cartoons and writes columns for Universal Press Syndicate.)

COPYRIGHT 2009 TED RALL

On Iraq, Antiwar Candidate Delivers More Carnage

Obama won the Democratic nomination and the presidency by speaking out against the Iraq War. Now that he’s packing for Washington, however, the old Chicago lawyer is using Harvard Law weasel words to make sure the war goes on for years.
Germans are organized. The French are snotty. Americans have a national character trait, too: inattention. It’s now obvious that Obama exploited our hard-wired inability to read between the lines to lay the groundwork for what many of his supporters will soon view as a terrible betrayal.

Right there, in a July 14th op/ed, is Obama’s triumph of plausible deniability: “The differences on Iraq in this campaign are deep,” he wrote in The New York Times. “Unlike Senator John McCain, I opposed the war in Iraq before it began, and would end it as president.”

Seems clear. End means end. Finito. No more. But there’s an interesting phrase in Obama’s promises to pull out, repeated throughout the campaign”: “combat troops.” “We should seize this moment to begin the phased redeployment of combat troops that I have long advocated,” he wrote in his op/ed. “We can safely redeploy our combat brigades.”

“It’s time to end this war,” Obama concluded. Ending the war would mean following the political cartoonist Matt Bors’ prescription: The troops would go to the airport. They would board planes. They would fly away.

But Obama doesn’t want to end the war.

Obama will classify some units as “combat troops” and send them to Afghanistan, which he wants to expand into an even bigger war. But tens of thousands, maybe even hundreds of thousands of troops, will remain in Iraq, killing and getting killed.

“Even though the [U.S.] agreement with the Iraq government calls for all American combat troops to be out of the cities by the end of June [2009],” reported the Times on December 22nd, military planners are “now quietly acknowledging that many will stay behind as renamed ‘trainers’ and ‘advisers’ in what are effectively combat roles. In other words, they will still be engaged in combat, just called something else.”

Obama isn’t just recycling Clinton’s staff. He’s also into his aphorisms: It depends on what the meaning of “combat troop” is.

How many non-combat combat troops will still be shooting and bombing Iraqis after 2011? “My guess is that you’re looking at perhaps several tens of thousands of American troops,” says Defense Secretary Robert Gates, a Bush appointee who has been asked by Obama to stay on—presumably because he approves of the superb job the Bush Administration has done in Iraq. Obama’s military advisors, reports The Los Angeles Times, “have said that residual force could consist of as many as 50,000 troops.”

When Americans hear about military advisers helping to train foreign forces, they think of JFK, who sent a skeleton crew of 1,400 advisers to South Vietnam in 1961. (Let’s not dwell on how that turned out.)

50,000 troops—this being the Pentagon, you know it’ll be more—is a full-scale war. Indeed, when President George H.W. Bush invaded Panama and overthrew its government in 1989, he used 57,000 troops.

Of course, we should have seen this coming. Obama talked and talked and talked about his opposition to the Iraq War. He’s good at that. But whenever he had a chance to put his vote where his mouth was, he chumped out. Time after time, he voted for Bush’s requests to send billions of taxpayer dollars to Halliburton and other war profiteers. He never voted no.

“I have been very clear even as a candidate that, once we were in, that we were going to have some responsibility to make it work as best we could, and more importantly that our troops had the best resources they needed to get home safely,” Obama said during the campaign. “So I don’t think there is any contradiction there.” But the money isn’t provided to get our troops home safely. It’s to keep them in Iraq, fighting and killing and being killed. As Obama well knew.

With Detroit automakers and three million jobs teetering on the brink of disaster for lack of a $25 billion bailout, you’d think Obama would want to end a war that wastes that much in 12 weeks. Yet, even in a depression, Barack Obama is no less devoted to the pit of blood and treasure that is Iraq than George W. Bush.

Forget preemptive war. How about preemptive impeachment?

COPYRIGHT 2008 TED RALL