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DANCE MACABRE
by Robert Wicke
The entire ttime of this "debt debate" passed with virtually no reference to the trade deficit. Of course, the trade deficit does not directly contribute to the national debt. But, it has a lot to do with deciding when the debt is in the danger zone. When the national debt is in the same general zone as the GDP, i.e. anywhere around 100%, it has reached the point when many economists quite rightly become alarmed. With the national debt being $14.3 + and the GDP being just shy of $15 trillion, we are just about at that point.

The current trade deficit is around $600 billion on an annual basis. If that deficit were eliminated, either by tariffs or by re-industrialization of the country, the GDP would be augmented by $1.2 trillion, because the $600 billion would thus go into the GDP, and because this expenditure for imports would cease being subtracted from the GDP. Then, with recognition that the trade deficit goes back to the stagnant 70's, it becomes possible to see that debt is not an abstract category. Instead it is related to the other side of the ledger. Assessing whether we have a sound economy is a matter of both sides of the ledger, not just the one that is about the debt.

This is not the same thing as agreement with Dick Cheney, for example, that "Deficits don't matter." That's not it at all. A lot went into that National Debt that was unnecessary and unjustified. That can be illustrated by looking a the chart that Juan Cole published in his article, entitled "A Story More Important than Debt Limit Kabuki." at
juancole.com/2011/07/top-stories-more-important-than-debt-limit-kabuki.html. The chart itself originates with Clusterstock, and it traces the following trends that add up to current deficits: wars in Iraq and Afghanistan; Bush era tax cuts; Recovery Measures; Tarp, Fanny, and Freddie; and Economic downturn. At the very bottom is the deficit without those factors, comparatively very inconsequential. Without a doubt, Social Security, Medicare, and Medicaid did not create this crisis, and Social Security did not contribute to it in any measure.

We live in an era in which the Corporations off-shore millions of jobs,
create foreign subsidiaries with an eye on their tax loopholes and other advantages. Then, after decades of down hill adjustments to corporate taxes, going from approximately 30% of Federal revenue to 5 or 6% currently, these same corporations claim through their representatives, to be "job creators." Any attempt to compel them to pay their share of the burden is dubbed "job killing." This takes place while the corporations as a whole sit on a at minimum $2 trillion hoard that would create more than a few jobs. The majority of both political parties are perfectly happy to allow them to walk with that.

Said majorities of representatives and Senators are, of course, not interested in doing away with another large item, the Bush tax cuts for the uppermost brackets of individual taxpayers. Nor are they at all interested in establishing a small tax surcharge on speculation in derivatives, which speculation played an enrmous role in the financial crisis that led to the current recession in the first place. Nor do most of them recognize the necessity of re-industrializing the country, so that at long last it makes something to trade in the world markets, which most probably would be the only likely opportunity for growth in the short run and for creating a healthy economy in the medium and long runs.

The voices are getting louder in the economics profession for an application of an updated version of Roosevelt's strategy for dealing with massive unemployment during the Great Depression. But, the majorities of both political parties, even while they talk of job creation, aren't hearing those voices, because they have mostly passed the basic test of serving in political office. To do so, one must be above all, a corporate liberal, a believer in the neo-liberal "free market" ideology. They all pay some homage to the supply side myth, that has been proven ineffective on every possible occasion over a period of three decades.

Not all their ill-founded beliefs are in economics, for that matter. These majorities of politicians are not all climate deniers, but few of the remainder "get it" in terms of the shrinking time remaining to act in the interests of the planet and the peoples living on it and actually take action to curb anthopogenic climate change, what we call "global warming." Again, these majorities of politicians in the present government may not all be funded by chemical companies, but they are deniers when it comes to understanding the need for the pre-cautionary principle in dealing with toxic chemicals. Forget the effects on people, when other countries are adopting the pre-cautionary principle, what chance would American products have in world market, assuming there even is that much of anything that can be called "American products."

As bad as the current predicament gets, we seem to be locked into the same malady identified so clearly four decades ago by Theodore Lowi, in The End of Liberalism. We are blocked by all sorts of special interests, too many and too compelling for the common interest to come into play. To put it another way, there is nobody minding the store, the common good of our country. And, while that remains the case, we will continue dancing our dance macabre. And, from here, it almost looks as though, we will continue our dance macabre right off the pages of human history.