There’s an old saying: When one door closes, another opens.
Whoever said that never worked in Washington.
The last four years have offered the Federal government a borrowing and investment opportunity that’s unprecedented in modern history. Interest rates have been at World War II-era levels, thanks to the Federal Reserve and qualitative easing, while investor confidence in Uncle Sam (and fears about other investments) created a situation where they were effectively paying the government to borrow money.
We could certainly use it. The official unemployment rate is more than 50 percent higher than the norm (7.6 percent vs. 5 percent), and even that figure’s artificially low. Long-term unemployment, youth unemployment, minority unemployment … all of them remain at staggeringly high levels, with years to go before anyone projects a normal workforce.
We could borrow the money, invest it in job creation, and be rewarded with an expanding economy that pays us back for our investment in both human and financial terms. And it’s not like we’d be creating make-work. America’s falling down.
There’s a small chorus of writers, many of whom are published here, who take up the borrow-and-invest refrain on a fairly regular basis. Today the topic is deftly addressed by Barry Ritholtz, business columnist for the Washington Post, who writes that “the era of cheap credit may be nearing its end. And thanks to a dysfunctional Washington, D.C., we are on the verge of missing a once-in-a-lifetime opportunity.”
Ritholtz notes that now, as in, our highways and bridges are crumbling, adding: “The electrical grid is a patchwork of jury-rigged fixes, vulnerable to blackouts and foreign cyberattacks. The cellular network of the United States is a laughingstock versus Asia’s or Europe’s coverage.”
And Ritholtz, whose beat includes investment, notes that these historically low rates have “begun to move higher as markets anticipate the end of the Fed’s quantitative easing.” Ritholtz concludes that “we still have a window to take advantage of these historically low rates. However, that window is beginning to close, and we need to act sooner rather than later.”
(His column is well worth reading in full.)
While Washington sleeps, America crumbles away. Why? How have we allowed that to happen?
The short version is this: The American people have been subjected to a bait-and-switch routine on a massive scale. The national debate should have centered solely on how much to borrow, where to invest, and how to divide the investment among the plethora of worthy projects dotting the American landscape.
Instead we were treating to the bread-and-circuses spectacle of “Deficit Commissions,” debt hysteria, and a cult of economic austerity that demanded spending cuts across the globe despite the utter absence of real-world evidence for its harsh and untested prescriptions. When the evidence finally did come in, it showed that austerity’s effects were as devastating as the Keynesian economists had predicted.
Austerity prevailed anyway.
This series of debacles should have spelled political doom for the extremist anti-government Republicans, whose political philosophy was utterly discredited twice: first by the 2008 crisis, then again by the devastating effects of austerity on Europe.
The Randian revenant was struck down twice, only to rise from its grave victorious.
Here’s how much things have changed: A few short years ago a President named George W. Bush and a House Speaker named Denny Hastert could don hard hats and celebrate the groundbreaking for a quarter-trillion-dollar highway bill – $286 billion and change, to be precise – and nobody thought twice about it. (And that was a far less worthy bill than a newer infrastructure bill would be, because a newer bill would be less laden with pork.)
But over the last few years, with borrowing costs far lower and the needs far greater, the idea of laying out that kind of government spending money (without diluting much of it with tax cuts, as Obama was forced to do with his stimulus bill) seemed unthinkable.
What anesthetized Washington? What severed it so thoroughly from real-world needs? In a word: Money. Yes, we should have been borrowing for infrastructure investment. But that could lead policymakers to propose tax increases for corporations and the wealthy in order to help with the repayment – which is exactly what should happen, but not what these powerful interest groups want to see happen.
Politicians had plenty of reasons not to displease them. And without public pressure, they had very little reason to displease them.
Somebody needed to spell things out for the America people. That somebody did not turn out to be the corporate-friendly Democrats of the Obama/Clinton/Third Way ilk, who still seem to dominate that party. It was Obama, after all, who appointed the anti-government, anti-elderly, and economically illiterate Alan Simpson and Erskine Bowles – long-term minions of antigovernment right-winger Pete Peterson – to run a “deficit commission” during the worst jobs and spending crisis in modern history.
The media did their part, too, covering “deficit debates” and fueling deficit hysteria while underplaying joblessness and ignoring the opportunities presented by interest rates and T-bill rates.
If Washington’s going to act, it’s going to have to act now. As Ritholtz says, it’s not too late. But time’s running out. As Bob Dylan says, “It’s not dark yet, but it’s gettin’ there.”
If the power grid fails or gets hacked, it could stay dark for a long, long time.