Monday, January 26, 2009

"Magic of the marketplace" insufficient for this crisis

I should clarify my previous post. Congressman Boehner is correct that some of the spending proposed in the so-called stimulus plan is ridiculous. My beef is his orientation against the use of government as an instrument to organize a recovery, partially through the issuance of credit for worthwhile projects, and toward a reliance on tax cuts because individuals and corporations guided by the profit motive will supposedly magically organize a recovery. (It is true that tax rates are higher on those still paying taxes, because the taxable economy has shrunken so much.) "The magic of the marketplace" might work when an economy is running fairly smoothly, but in an existential crisis, a warfare-scale mobilization is required. We need a central organization to focus the energy of everyone into a plan devised by proven trustworthy experts, and the only one with the ability and authority to do so is the federal government. Otherwise, the British Empire, which has deliberately created the economic crisis, will by default "organize" the economy into chaos.

As indicated above, funding for a recovery shouldn't be limited to the customary sources. A national bank can and should be used as a source of credit for basic infrastructure projects which will add a commensurate value to the economy. If such an approach were used, then the burden for the recovery wouldn't have to fall on the shrunken tax base.