Robert Reich: Blame Both Sides

Interesting article in this morning’s Salon War Room:

Imagine your house is burning. You call the fire department but your call isn’t answered because every firefighter in town is debating whether there will be enough water to fight fires over the next 10 years, even though water is plentiful right now. (Yes, there’s a long-term problem.) One faction won’t even allow the fire trucks out of the garage unless everyone agrees to cut water use. An agency that rates fire departments has just issued a downgrade, causing everyone to hoard water.

While all this squabbling continues, your house burns to the ground and the fire has now spread to your neighbors’ homes. But because everyone is preoccupied with the wrong question (the long-term water supply) and the wrong solution (saving water now), there’s no response. In the end, the town comes up with a plan for the water supply over the next decade, but it’s irrelevant because the whole town has been turned to ashes.

OK, I exaggerate a bit, but you get the point. The American economy is on the verge of another recession. Most Americans haven’t even emerged from the last one. Consumers (70 percent of the economy) won’t or can’t spend because their major asset is worth a third less than it was five years ago, they can’t borrow as before, and they’re justifiably worried about their jobs and wages. And without customers, businesses won’t expand and hire. So we’re trapped in a vicious cycle that’s getting worse.

The former labor secretary’s solution?  More stimulus… but the case in point is worth referencing, namely that European Union is in much deeper trouble than the United States is in, our collective wealth and disposable income allows us to shrug off body shots that effectively killed the British Empire, and — in worse case scenarios — we are the reserve currency of the world and can devalue our currency to meet existential threats.

Europe is scared of what’s happening in the United States — but it’s not America’s faux “debt crisis” that’s spooked them. It’s the slowdown here (and the likelihood of another recession), made all the worse as our debt obsession prevents the U.S. government from doing what it should. A slowdown and recession here mean fewer exports from Europe to America. When combined with their genuine debt crisis, this could push Europe’s economy over the edge.

…and as I’ve said before, the S&P downgrade is just that — a European attempt to fend off capital flight when (not if) European markets collapse.

Meanwhile, everyone wants what was promised to them by government and politicians, yet no one here in the United States (in either political camp) could “live free or die” even if they wanted to.

Still, Reich misses the greater point.  If there is no “debt crisis” then there is no reason to spend on stimulus.  Rather, Americans need to turn the TV off and enjoy what’s left of the summer.  The world is a far better place without the mainstream media outlets cheerleading their perspective political camps over the abyss.  Good ratings… but terrible brinkmanship.

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