Pointless Argument


The former NFL football player, Bubba Smith, died this week. After his football career he acted in the Police Academy films. He also appeared in some commercials for “Miller Lite” beer which featured people “arguing” about the reason to buy the beer. Less Filling! Tastes Great! While the “argument” was pointless, at least the commercials helped to sell the beer.

Unfortunately, our political leadership in Washington is about to engage in another cycle of what has become Washington’s pointless argument. Here the slogans are “Spend More!” and “Cut Taxes!”

Liberal Democrats are arguing that when the economy slows down, the government needs to increase spending. This is based on the ideas of John Maynard Keynes, a British economist who proposed a solution to a stagnant economy. He argued that when private spending has stopped, the government needs to make up for the private shortfall by increasing government spending. The “Keynesian approach” calls for government spending to be “counter-cyclical” by increasing spending when private money is hanging back and decreasing spending in boom times to avoid excess.

This is a logical argument, but it has not been followed very well. The U.S. government, and many Euro-zone governments, have never slowed spending in “good times” and have produced an incredible amount of public or “sovereign” debt. Any increase in spending will only add to very large existing deficits.

Conservative Republicans are arguing that corporate and investment money is being held back because taxes are too high. Therefore we need to cut taxes to “get the economy going.” While this has helped to improve the economy under Presidents Kennedy and Reagan and added to tax revenues, it is not likely to work now.

Sadly, both sides are assuming that government actions are logical and consistent. If that were so, either approach might work. Unfortunately government consistency or even rationality can rarely be assumed. As the lawyers say, we are assuming something “not in evidence.” In fact, the evidence is to the contrary.

Either approach is like pushing the gas pedal in a car. It won’t work if you are stomping on the brake pedal with your other foot and have the parking brake engaged and the transmission in neutral. That is what we are doing.

Our society has mastered the art of saying “No!” to new development and new jobs. Children have their Lemonade stands shut down because they don’t have a license. Large corporations go through all kinds of regulatory hoops to try to create jobs and have the effort stopped at the last moment.

Shell Oil spent two billion dollars to get drilling rights and another two billion in drilling and getting ready to ship oil. At the last minute, that is, at the moment of highest cost, the administration shut it down.

Boeing had two plants producing the 787 Dreamliner in Seattle. They spent two billion dollars to build another plant in South Carolina. Just as they were starting to hire, again at the moment of highest cost, the National Labor Relations Board, presumably with the blessing of the administration, brought suit to block the opening of the plant.

Whatever the merits of each of these cases, the message is clear. There is no reasonable expectation that an investment to create jobs or goods in the United States will be allowed to proceed to fruition.

Bernie Marcus, a co-founder of Home Depot, was asked, “What’s the single biggest impediment to job growth today?” His answer was, “The U.S. Government“. It is obvious to anyone with money to invest that government hostility to job creation is at an all time high.

Corporations are sitting on large amounts of cash. It is getting so bad that some banks are charging a fee to large depositors. Companies are “parking” their money because they see no rational way to invest it. If any investment can be stopped at the last minute, every investment is a gamble.

So the game continues. “Cut Taxes!” “More Spending!” And we all sit waiting for something to change while the politicians think only about the 2012 election.

The U.S. financial “car” is stuck in neutral. Until there are substantial changes in the attitude toward businesses and job production, either trick to “hit the gas pedal” is a waste of time.

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Posted in Economy, Energy, Environment, Government, Jobs, Leadership

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