The revenge of trickle-down economics

[CHIMO]

President Obama's basic budget for fiscal 2012 is mostly a done deal, supported by the entire political establishment. The hyped choreography of forthcoming battles between Democrats and Republicans is a very secondary sideshow. The battles clothe basic agreement in a disguise of fierce oppositions – perhaps aimed to mollify each party's none-too-discerning militants.

Both sides agree that the US private economy is in such a poor and dangerous condition that it needs massive fiscal stimulus from the federal budget: classic Keynesian policy. Washington thus plans to spend roughly $3.5tn, while taking in tax revenues of roughly $2tn; hence a deficit of $1.5tn. In the light of such numbers, the debates of Democrats and Republicans over spending cuts likely to be of the order of $40-60bn are inconsequential. They become yet more inconsequential in light of the fact that the federal budget's projected deficit of $1.5tn will carry an annual interest cost of $40-60bn. That interest will be an additional budget outlay offsetting the likely cuts arrived at the end of loudly publicised debates over spending reductions.

Both sides agree that government spending will continue to follow the old "trickle down" theory, despite its failure to date. Massive federal outlays on the largest banks, insurance companies and selected other large corporations produced a "recovery" for them, but not in the rates of unemployment, home foreclosures and state and local austerity budgets that keep crippling the US economy. Federal largesse has yet to trickle down, but both parties proceed on the assumption that it eventually will. Neither party tallies the economic and social costs of massive unemployment, home loss and state and local austerity budgets. Neither party offers any alternative to "trickle down", as if no alternative exists or is worth debating.

Yet, of course, there are alternatives.

http://www.guardian.co.uk/commentisfree/cifamerica/2011/feb/14/useconomy-usemployment

[midnight]

1. The establishment has all the details worked out.... The belt tighting

via cutting off grandmas heat, job cuts and it is inconsequential in addressing the deficit and that's the problem.