Back in the early days right after World War 2, America had an opportunity to be the only game in town in regards to manufacturing. Some on the right have said this is what helped us escape the doldrums of the Great Depression. If this is true, America had another chance to become the economic powerhouse of the world again, this time in 2011.
The stock market collapsed the entire week of August 6th due to 2 issues. The first issue is the world economy is contracting because of lack of government and consumer demand. Almost every single major government is spending less on everything. The second issue is the last major economy that could still provide demand was the United States, until the Republican Party led by the tea party took the austerity path. This was the straw that broke the camel’s back. Now with the U.S. debt ceiling deal done on Tuesday August 2nd, the markets knew that the last hope to spike economic demand was going to contract rather than spend and grow. That was when the bottom started to fall out. According to the Economic Policy Institute, this debt deal is going to KILL 1.8 million jobs by 2012, just one year away.
The path America should have taken was increased spending rather than the Republican route of contracting back into the fetal position. If America began spending, we could have had the opportunity to be the only country with the capability to buy things. Many major corporations move not only to countries with low labor costs, but they also move to countries where there is growth. The major economies are contracting, thus if America took the stimulative path, we would have been the growth capital of the world, just like we were post World War 2.
Companies around the globe would have invested in America because of our growth and consumer demand. According to a recent Wall Street Journal report on a CBS radio broadcast out of New York, company CEOS that are sitting on trillions of dollars were asked why they aren’t hiring and instead sitting on their money. The simple answer, demand! They do not see the NEED to hire because consumer AND government demand is down.
Corporations DO NOT hire people to do nothing. They hire people because they have work to do. The only way for a business to have more work, is if there is demand. The consumer is strapped, credit is hard to obtain and wages are down. They ONLY entity that has the ability to spur growth is the government.
The market itself REALLY wants us to borrow. The interest rate for the United States to borrow is extremely cheap. Sure, we would go into further debt in the short term, but that is exactly what is needed. The businesses would begin to hire, put the people back to work and give the consumer more confidence to spend money. Once the economy is robust and expanding, then the government takes its foot of the gas and we start paying down the debt, shockingly just like we were supposed to do in 2001 until the borrow and spend Republican party took control of the budget.
There is approximately one trillion dollars’ worth of infrastructure projects that the country could invest in, both above ground and below. This would not only put construction people to work, but also accountants, heavy equipment manufacturers, like Caterpillar, steel workers, and many more.
Instead the modern day economic hit men in the tea party followed the path of Europe and purposely contracted the economy. We had the opportunity to re-live the 1950s and 60s again by being the ONLY game in town, now in what some are calling the political plan to take over the government; the Republican Party sacrificed economic growth, for political power.