We’re So Screwed, Part II
So now that the new deal is becoming clear, it’s more and more obvious that we’re going to be partying like it’s 1937 (with apologies to Paul Krugman). With the media machine already in place, and the fact that the deal being struck is about 95% Republican (Seriously it’s a wet dream for the right wing), there is now nothing in place to prevent us from slipping back into another demand side recession.
Businesses aren’t going to magically start hiring, not when they’re able to make bigger profits with a smaller workforce. In addition, with demand still depressed, there is no incentive for housing, manufacturing, or any of the other major industries that could pulls us out of a recession to hire and push demand up.
As we cut government spending further, we’re pushing further and further away from building and creating the infrastructure America needs in order to function as a country. Corporations have no incentive to add on excess capacity in fields like Water, power lines, roads etc. All of which had been previously built and created by federal, state, and local governments. The Government simply gave the infrastructure to private companies and said, “here, run with it.”
That would have worked great had the companies actually maintained the infrastructure. Instead, what we have is a crumbling infrastructure that can’t even handle a heat wave without rolling blackouts. That’s third world country stuff. Not America. Do you see the corporations rolling out higher capacity lines? Nope, instead the corporations simply gamble that the blackouts and power outages won’t be frequent enough to cost them more business that the cost of new capacity.
Yes, I know, that’s a tangential point, but it illustrates how businesses work to do more with less, great for the companies, horrible for employment.
The point I’m trying to make is that austerity measures have already cost the Country about 1.2% growth to our GDP. To give you an idea of how severe that is. say our current GDP is 15 trillion. Our current tax collection is around 15% for the US taxes. So typically we’d get about 2.250 trillion in federal taxes as it stands now, we’re looking at 2.223 trillion in tax receipts. 27 billion may seem like small change, but remember that’s only for one year. 10 years is suddenly 270 billion, And when you’re talking about spending cuts along the lines of 2.7 trillion dollars over 10 years, you’re only netting about 2.43 trillion. Then add in that growth is going to slow further, and suddenly all that work to cut 2.7 trillion is going to net us less and less, until we reach a point that we’re losing more in lost tax revenue than what we’re saving.
More on how this helps the Republicans in part III.
(Originally posted at blog.bloodstar.org )