I won’t sign the letter
I received a request today from economists Heather Boushey, Larry Mishel, Alan Blinder, and Laura Tyson to sign an open letter addressed to Barack Obama and members of congress which argues we shouldn’t cut spending on “critical investments”. The authors are extremely well connected within the democratic party establishment and their views are therefore of some interest. Will I sign the letter? Not a chance! I count ten objections within just four short paragraphs. Pretty incredible considering the authors position themselves on the left of the US political spectrum. Some of the objections may seem minor but I believe they in fact raise crucial issues on where we’re heading as a society. I think the tone and substance of the letter reinforce my point from yesterday that workers have no institutional support.
Here’s the letter; I’ll follow with my objections listed in order of appearance.
As economists, we believe it is short-sighted to make budget cuts that take away necessary investments in our human capital, our infrastructure, and the next generation of scientific and technological advances. These cuts threaten our economy’s long term economic competitiveness and the strength of our current economic recovery.
Investment is the cornerstone of economic growth and the key to our long-run national prosperity. It creates jobs now and lays the foundation for long-term economic growth and a strong middle class. As the Congress begins to debate the federal budget, they must be careful to sustain critical investments in the productive capacity of the United States.
Both the private sector and the government have critical roles to play in growing our economy: business investment drives the economy, but public investments provide the foundations on which business investment depends. This winning combination paves the way for America’s economic success. Cutting necessary investments from the federal budget will only undermine the long-term competitiveness and productivity of the American economy.
We recognize that resources are scarce and that fiscal responsibility demands that federal budget policies tackle the long-run budget deficit. But responsible governance demands that we neither damage the recovery today nor forsake America’s economic future by cutting critical investments.
Center for American Progress Action Fund
Economic Policy Institute
University of California, Berkeley
Objection 1: As economists, we believe it is short-sighted to make budget cuts that take away necessary investments in our human capital…
I’ve always detested the terms “human resources” and “human capital” as they emphasize the hard reality that living people are in fact nothing but commodities within our economic system. “Human capital” had its formal theoretical beginnings within the right wing Chicago School in the mid 20th century with Milton Friedman and Theodore Schultz. By using the term, the authors are advertising a neo-classical economic view of man in which education is valued to the degree it provides a return on investment in the market. I think education’s great but does it have to be so inhumanly linked to the concept of capital? And on a purely economic basis, wouldn’t the return on investment in human capital be expected to decline if more people invested? How many physicists or engineers or teachers can the economy support?
Objection 2: These cuts threaten our economy’s long term economic competitiveness…
Paul Krugman, for one, has correctly objected to the “dangerous obsession” of competitiveness.
“Competitiveness is a seductive idea, promising easy answers to complex problems. But the result of this obsession is misallocated resources, trade frictions and bad domestic economic policies.”
And to be “competitive” in today’s world can mean little more than to have competitively low wages. That the future of human society should be based on competition is a frightful prospect. It’s a horribly wrong path.
Objection 3: Investment is the cornerstone of economic growth and the key to our long-run national prosperity.
I have nothing against investment but it’s the cornerstone of economic growth only in economies with obscene levels of income inequality. It’s a fundamental Keynesian insight – those with great wealth have a lower propensity to consume and when inequality is great, the only way to get needed circulation is through massive investment spending. Keynes saw this was futile and concluded that redistribution of wealth would be a far better way to assure adequate circulation. By placing such importance on investment, the authors implicitly accept the status quo and dodge the fundamental reality of inequality.
Objection 4: It creates jobs now and lays the foundation for long-term economic growth…
Sounds like “investment” is at least partially a make work project. There should be no place for make work projects in a sane society. If we don’t need the job done, then people shouldn’t be forced into working on them simply to make a living. And as far as laying the foundation for future growth, that’s pretty dubious. What specific investments today will enable the economy to grow in the future? No one has a clue.
Objection 5: …and a strong middle class.
America was founded on the myth of a classless society yet the inherent goodness and value of a middle class is seemingly accepted without thought. Anyone who values democracy should object to the existence of a middle class for it necessarily means an upper and lower class. It implies oligarchy and poverty. Historically, the middle class consisted of professionals, managers, white collar workers, and small business owners. The interests of these groups are often aligned with those of the upper class and against those of the majority of the population. The oligarchy that rules this country has every reason to support a middle class; the majority population does not.
Objection 6: … business investment drives the economy…
This is nothing but ideology. Business investment, within an unequal society, can drive the economy during boom times. But booms don’t last and the insufficiency of business investment inevitably causes recessions and depressions. As we speak, corporate America is sitting on two trillion dollars of idle cash – if they’re driving the economy, they’re driving us off a cliff. A central conclusion of Keynes was that private investors could not be trusted to invest sufficiently to sustain prosperity and investment therefore had to be socialized. The authors don’t seem to put much stock in Keynes.
Objection 7: …but public investments provide the foundations on which business investment depends.
This is a central neo-liberal dogma. The primary purpose of government is to provide the infrastructure so that business can be profitable. Isn’t this nothing but a transfer of wealth from society to business? The premise that government exists to provide collective welfare is all but lost.
Objection 8: Cutting necessary investments from the federal budget will only undermine the long-term competitiveness and productivity of the American economy.
See Objection 2.
Objection 9: We recognize that resources are scarce…
This makes absolutely no sense. By any reasonable measure – the number of workers, their productivity, infrastructure, technological capacity, etc. – our ability to produce is higher today than ever before. By resources, the authors can only mean money. But the dollar is not something that requires excavation and we’re not on the gold standard. If the problem is solely one of “resources”, i.e. money, then the government should simply print it.
Objection 10: … and that fiscal responsibility demands that federal budget policies tackle the long-run budget deficit.
As noted in many of my posts dealing with monetary issues, the idea that the deficit is a problem is completely and utterly false. We control the dollar and it can be created at will. We don’t need to borrow in order to spend and there’s no reason we can’t print the “resources” we need in order to maintain a just, equitable, and prosperous society.
This is a long post dealing with a short letter. But the letter reveals a great deal about elite consensus within the democratic party. Because it incorporates so many world views that are harmful to the majority, I think it’s worth a bit of attention.