THE ELBERT FILES: Our worst economic enemy
Friday, November 30, 2012 7:00 AM
• Business Record columnist
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© 2012 Business Record
I’m tired of hearing about the fiscal cliff from politicians and commentators, most of whom have no more foresight than Chicken Little.
Few have any idea how to clean up the economic mess we are in.
Today’s problems are easily the worst we’ve faced in 80 years.
At one point, everyone seemed to understand that. Now, many so-called experts act as if this is no different than the stagflation of the 1970s or the savings and loan crisis of the 1980s, or the dot-com crash.
But the problems we face today are different, and we need to keep that in mind.
The last time things were this bad, people with the best intentions, including Iowa’s great humanitarian Herbert Hoover, made things worse by making the wrong choices and causing the economy to contract when it needed to expand.
The best thing politicians can do now is nothing. Leave things alone because, believe it or not, they are improving.
OK, that’s a bit of an overstatement.
The politicians should leave things alone once they’ve fixed the damage they did a year ago by creating the fiscal cliff.
The two biggest dangers the economy faces today are:
1. Going over the cliff and triggering the draconian cuts and tax law changes that Congress created a year ago as a poorly chosen incentive to bring the budget into balance.
2. Putting in place an equally severe “grand bargain” to balance the budget.
I believe as much as anyone that a balanced budget is necessary for long-term economic health. But I also know that the only times this country has had a balanced budget were when the economy was firing on all cylinders.
We know that’s not the case today. Trying to balance the budget today or tomorrow is like a dog chasing its tail; we’re never going to do it.
The only realistic way to balance the budget is by growing the economy.
If you try to do it by making big cuts to government spending or with big tax increases, the only thing you succeed in doing is slowing down the economy.
Keep doing it enough and you create a whirlpool that sucks the bottom out of everything, which was what happened during the Great Depression.
A year ago, when the fiscal cliff was created, it looked as if the economic recovery was stalling.
The politicians and commentators thought they had to do something. So, they did. They created the fiscal cliff as their incentive to fix things by the end of this year.
But now we are at the end of the year, and nothing is fixed.
Or is it?
The unemployment rate is a full percentage point lower than it was a year ago, and the gross domestic product is more than a percentage point higher.
That certainly sounds like improvement to me.
Granted, it’s not as much as most of us would like, but we forget how bad things were.
Or how bad they could be.
Much of Europe is in recession.
We’re not. That’s good.
But if we make the wrong choices, we very easily could be.
All of which brings to mind my favorite saying from Walt Kelly’s classic comic strip, “Pogo”: “We have met the enemy and he is us.”
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