Thursday, September 19, 2013

Brace For Impact

So in other non-news, the Republicans would like to swing the budget ax, and chop about $40 billion out of the Supplemental Nutrition Assistance Program, otherwise known as Food Stamps. While there is plenty of shoutrage, there's little real surprise.

As I drifted away from being a consistent Democrat and into the netherworld of skeptical non-partisanship, I became convinced that both major American political parties were up to the same thing: Looking for ways to punish the other side's core voters and/or preventing the other party from using public funds to buy votes. But as I've taken a closer look at things, I've come to the conclusion that the Republicans might have a different, if related, goal in mind: crashing the United States economy. And really not out of spite, either.

While Republican rhetoric is often full of the idea that there are plenty of jobs (however menial) just waiting for anyone who wants one and is willing to put in even a modicum of effort to get one, the fact of the matter remains that there likely aren't really enough jobs to go around without some serious labor market reforms, which will have to entail abolishing both minimum wages and certain job protections. Prohibitions against people who enter the country illegally working would also have to be strengthened. Couple that with the large-scale removal of the social safety net, and the bottom falls out of wages, as competition for employment leads workers to undercut each other to find paying work.

And when the bottom falls out of wages, the bottom falls out of domestic prices as well, and a dollar becomes more, rather than less, valuable. Deflationary currency benefits savers. (And what are wealthy people other than big-time savers?) It also makes borrowing less attractive, as the dollars that debts are denominated it become more dear as time goes on. Lending becomes more profitable, but there are fewer people who want to borrow money. But then again, you don't need to constantly invest simply to maintain value. Depending on how you look at it, there are actually benefits to the public overall from arresting the constant march of inflation.

The problem is that getting there would be VERY painful - and the longer things go on, the more painful it becomes. My suspicion is that Republicans want to bring the pain now. Yes, this will also have the effect of punishing Democratic constituencies - poor people don't have much in the way of savings - the inability to save is what makes them poor. But the Libertarian school of economic thought says that without what many on the Right feel are artificial barriers to work, in the end, everyone will be better off. After all, prices HAVE to come down. Businesses won't be able to maintain their higher prices when people have less money to spend. And if you believe that a man who sells five potatoes wants nothing more than to sell six, it's easy to conclude that prices will continue to drop.

Of course, all of this relies on the chicken-and-egg nature of economics to shake out in a certain way. Also, as I've laid it out here, it's vastly oversimplified, since I suspect I could spend weeks explaining it all. But it all makes sense to me (which, according to my father, means that no-one else will see it this way). And in a way, it makes more sense than see the Republicans as reverse-Robin Hoods, who want to tax the poor to give to the rich - which isn't a really workable model, long term. Of course, it's possible that the political class is merely telling certain people what they want to hear. We'll have to wait and see.

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