Stand for businesses: Letters for Thursday, Feb. 4
Join the discussion below, or Read more at LA Daily News.
#1 Feb 3, 2010
Government isn't a business, nor can it be operated as one.
It isn't allowed to make a profit, and it isn't allowed to fail.
Government programs rarely, if ever, have a fee structure that makes it self supporting; they are typically funded in part by other unrelated sources too.
And who in their right mind really wants government, a contracting operation, to go belly up?
Would you really be better off if business was completely deregulated of all labor, safety, and environmental laws, and paid no taxes of any kind?
#2 Feb 4, 2010
There are two things missing from the debate on deficit spending. No, make that three.
!) The bulk of our budget defict was incurred between 1980-1994 and from 2001 to the present, but primarily from 1980-1994. We entered this depression, and that is what it is, with a huge existing deficit from the Reagan/Bush era and from the second Bush era tax cuts, which cut Federal revenues as a proportion of national income to a fifty year low.
2) The equation of national income is GDP+C+I+G+(EX-IM). National income is the sum of consumption, investment, government spending and net exports. Since 1980 net exports have been a negative number, we run trade deficits. Beginning in 2008 both C and I declined rapidly. Guess what happens to GDP when this happens? If you look at the equation, the only way to prop up a GDP in the short term ( emphasis on short term ) is to run a budget deficit. Now, when growth returns, a nation must pay down it's debt. We are not there yet but will be soon enough. When the economy is booming resist the siren call for "tax relief". That is the exact wrong move. Use properity to pay down the national debt. Run budget surpluses as we did in 1999 and 2000. It is very doable.
3) Everyone knows that printing money leads to inflation. Right? Maybe. To keep an economy growing, the money supply has to grow with the economy, not too much, not too little. Too much money supply growth, from loose bank lending and from deficit spending, can lead to inflation. But, what happens when the money supply contracts? Less money chasing the same or nearly so goods and services? You get deflation, wages and prices fall. Does anyone here know what happened to our money supply after 2008? A clue lies in a move by the Fed in March 2006 when they stopped publishing the figure for M3, very large time deposits and hedge funds. In 2006 M3 was growing rapidly, but the Fed stopped publishing this figure, apparently in some opinions to hide inflation from view. A few economists found ways to calculate M3 on their own. What happened to M3 in 2008? It fell off a cliff. There was a huge decline in the money supply, worsened by the collapse of stock and housing prices. This was a classic deflation and it called for emergency action. The short term band aid while more permanent policy measures are put in place is to pump money into the economy, or inflationary monetary policy. This is the one time where it is good policy, and it is what the Fed and Treasury did. Not doing this would have lead to a death spiral, worse than inflation as everyone defaulted on debts as their wages fell and unemployment worsened. We barely dodged that.
#3 Feb 4, 2010
Find out how many Fortune 500 Companies from 1950 are still in business today and ask yourself if modeling government off of business is still such a grand idea. I'm not so sure business managers are the oracles they are made out to be. Businesses fail all the time but who cares? They are not answerable, with rare exceptions, to the public at large so there is no reason for the public as a whole to really care. By comparison our current Constitutional government is the oldest continuous government extant. That's a pretty good record and I would be careful not to do anything that will weaken it's stability.
Business owners can be tyrants if they wish, and pretty much any manager will try to staff his or her operation with people who support their vision. A President however, has to deal with the people we put in Congress, and too bad if they do not support his or her ( hopefully someday ) particular vision. Likewise, Congress is under no obligation to toe the line to a President they do not like. We as citizens elect people to Congress who do not like each other and do not like the other side's policies. A CEO style of management, my way or the highway, will not ever work in a representative. You need a much more conciliatory style, the ability to compromise and make deals, to get things done. We, as citizens, have refused to allow our representatives to compromise, to our mutual detriment. Getting nothing done might meet some extreme notions of ideological purity, but it fails to meet the broad needs of our nation. A business manager can fire anyone who does not support their vision, the President cannot fire Congress if they oppose them, and the majority party cannot fire the minority, they both must find ways to work together. It's no place for ideological hard heads or hard nosed manager types.
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