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To the economy, September 11 now appears to have been a transient shock. Sales, confidence and the stock market plunged, but then returned. As the dead cat bounced, optimists declared recovery to be near. The so-called stimulus package died. And so we now face a classic test of the predominant economics: Either recovery will happen, or it won't.

I'm betting against it. For the aftermath of September 11 also boosted the economy in several equally transient ways. Lower interest rates spurred mortgage refinancing. The tax rebates added to personal income and savings. Oil prices fell sharply. Good weather extended the building season. And the automakers took heroic losses to clear their inventories, as did retailers at Christmas. All of this, so to say, fanned the embers. None of it provided new fuel.

Meanwhile, larger depressive forces remain in place. Investment continues to fall; unused capacity continues to rise. The automakers are shutting down and laying off. Consumer spending has slowed. Exports slump as recession deepens around the world. Enormous deficits are opening in state and local budgets, with spending cuts or tax increases already estimated at nearly $100 billion for next year. About 8 million Americans are jobless now, 2.5 million more than a year ago.

Last year's tax cut was supposed to keep America growing. It failed. The Republican goal remains, naturally, to get another tax cut. This is not really economic policy, merely another tactical variation on a permanent agenda. Call it ripoff as a philosophy. Enron writ large.

Democratic strategy has been to help the wounded and hope for the best. Extended unemployment insurance and healthcare would be useful. But they're not enough. Democrats are having trouble leaving their illusions--budget surpluses, debt reduction, "fiscal responsibility." In truth, budget deficits are normal. Right now large budget deficits are necessary. The job is to end the recession, to restore full employment, to recreate conditions for growth. If small steps won't achieve this, large ones are demanded.

Alan Greenspan, meanwhile, has lost relevance. He may cut interest rates some more. It won't hurt, but it won't give us recovery. "Pushing on a string," they used to call it. Business investment won't return until profits do, and that won't happen until consumers have paid down some of their debt. …