Congress and most politicians are out of touch with the real world. They do not cut their own grass, go to PTA meetings at public schools or wash dishes. Rather, they have lifelong guaranteed pensions and health insurance, their children attend private schools, and to top it off, they take a five-week vacation. And Obama celebrates his birthday by raising millions of dollars for 2012. These folks are not like us, but I have said this before as well as pointed out that there is no difference between Democrats and Republicans. More than 40 percent of senators are millionaires with Democrats comprising four of the top five and more than 230 members of Congress are millionaires.
I hate to say it (not really, but I warned folks three years ago that we were in a depression, that the fat lady had not started to sing and the vultures were circling).
Solutions to the economic quandary from a federal standpoint are topical and isolated, ignoring that we are not in a closed economy as we believe, but rather a global economy. Keynesian approaches cannot work as they did in the times of FDR for we are no longer on a gold standard and because spending is moot since most dollars will go to foreign debtholders who will spend the money abroad and not to create jobs in the U.S.
No matter what we do or don’t do via political dysfunction, we cannot escape from the fact that Europe is in a financial crisis from the run on banks in Greece, to the observation that Italy from September 2011 will be broke, to the fact that the risk related to both Spain and Italian government bonds is unsustainable and unbailoutable (if there is such a word). This is essential to understanding the U.S. economic crisis because 25 percent of our exports go to Europe and a large corpus of our business operates out of Europe. Making money in Europe has sustained us but it may be over because nations with bond yields above 6 percent (Italy and Spain) will eventually destroy the European economy. Not to mention that none of our debates, even the recent debt ceiling debacle, have dealt with this issue or addressed long-term economic growth.
The danger zone confronting Europe is hitting America. Pundits fear the ubiquitous double-dip recession but the truth is that we are already in a depression. Our structural weaknesses accumulated during the boom years are still not being addressed. The U.S. is headed not just for double-dip recession but rather a full-blown depression. Obama, following the Bush inept plan to grow the economy only temporarily interrupted by a bunch of stimulus, which ultimately weakened the economy further (the ranks of the unemployed have swelled by two million since it started).
So to understand this, go to your local ice cream parlor, if you can afford it, and order two scoops of ice cream, and see how long it takes for them to merge into one. Yes, a double-dip recession does equal a full-blown depression.
–torrance stephens, ph.d.