When it comes to the economy GOP has an ideology but no plan

Dec 13, 2011 12:00 am

To the editor,

Regarding Marc Abear's "Simple: payments on debt will preclude spending on something else": it is NOT simple and requires a multi-faceted plan to stimulate a stuck economy. Mr Abear simply repeated everything he said last time like the comical notion that the "free" market is ultimately rational. And he still refuses to accept the importance of raising revenue. The most effective way to deal with an economic downturn is NOT to address debt first. Doing that further injures the economy. Payments on debt precluding spending is the worst thing we can do in a downturn. The debt-first ideology is impotent in freeing "trapped liquidity". Freeing trapped capital is primary to an economic recovery. It needs a shove.

In a CBS News/New York Times Poll. October, 2011, people were asked what their priority was. 57-percent said JOBS. 5-percent said the debt and deficit. 57-5! The CBO has warned Congress that cutting spending in the middle of economic downturn would have a negative impact. The CBO pointed out the most effective way out of this mess is to create programs that spark economic activity, joined with "long term" debt payoff. The CBO recently pointed out that hundreds of thousands of jobs could be lost and economic growth would be hindered with the GOP's latest alternative to the president's jobs and tax holiday plan. Marc, like the GOP, has it backwards. Like Andy Boutin, he watches too much Fox brainwashing. Fox refuses to talk about revenues, too!

Small business tax cuts and credits, jobs and building programs, benefit extensions, and demand-side tax cuts pump capital into the economy. Ending the Bush tax cuts and loopholes for the wealthiest, repealing corporate welfare like oil subsidies would raise trillions in revenue over a decade. And no more Mr. Nice Guy to companies that move our manufacturing base overseas.

In economic downturns, the Keynesian pump-priming has worked quite well while Mr Abear's cut-cut-cut ideas have always drowned. Europe's IMF austerity plans made their situation worse. A good Keynesian stimulus plan includes points in time down the line where specific debt related policies kick in. Not one recovery in the past employed the misguided debt pay down prescription yet Keynesianism has worked just fine. Seemingly unknown to Mr Abear, it's quite difficult to pay your debts and build for the future if you're not raising substantial revenue.

How was it all done then? FDR began work projects, returning millions to work. On top of that, with the Revenue Act of 1935, taxes went up for the $75,000 and $5,000,000 tax brackets. Tax loopholes the wealthy were using to avoid paying taxes were closed. Corporate taxes were cut for small businesses and hiked for large ones. With these tools, FDR brought unemployment from 25 to 14-percent in three years because he had a good plan and a mentally fit Congress he could work with. Trouble reappeared in 1937 when he was swayed by conservatives to cut spending. An immediate downturn that erased much of the gains resulted. It was too soon for that part of the plan. FDR then introduced and signed another stimulus plan and the country was back on track 11 months later. With the recessions of 1945, 1948-1949, and 1953, counter-cyclical fiscal policies in place since FDR worked. But the recession of 1957-1958 was much deeper than those above. According to the DOT webpage, "In August 1957, the country had slipped into a recession that would increase unemployment by 7-percent and reduce corporate profits by 25-percent by April 1958. One of the reasons the president had promoted the interstate (highway) system was just such a situation — that he would have a public works program that could be expanded or contracted to control the economy. To stimulate the economy and avoid losing momentum, Congress passed the Federal-Aid Highway Act of 1958." Eisenhower knew the plan.

The sluggish economy of 1961 led Kennedy to present Congress with a sizable stimulus program. By June, 1961, all parts of the plan had passed. Social Security payments and the minimum wage increased. The stimulus provided 420,000 construction jobs under the new Housing Act, $175M in higher wages, $400M for over 1,000 depressed regions, $200M to $750,000 children on welfare, and $800M in extended unemployment benefits for three million unemployed workers. The economy stayed strong until the Nixon years. When Bill Clinton sought to raise revenue with a modest tax increase for paying down the mountain of debt created by Reagan and Bush, tea party economist Dick Armey warned that it would mean the end of American prosperity. History tells us that the revenue raising worked and Bill Clinton handed the next president a SURPLUS after a period of unequaled prosperity. Dick Armey is still stupid.

Economists with half a brain know what to do but the Republicans are doing everything they can to stop it. It's deliberate because Obama is right on the mark; jobs programs, demand-side tax cuts, ending the Bush tax cuts, extending unemployment benefits, etc. These are proven methods yet the cut-cut-cut crowd can't see past their noses. Right wingers have an ideology, not a plan.

James Veverka

Tilton