Monday, November 17, 2008

May you live in morally hazardous times

I am utterly fascinated by this graphic. One picture sums the entire US economy over the last ninety years:

I haven't meditated on a single image this long since I got rid of my Tarot decks. Every time I look at it, I'm drawn to the thick red line of US national debt, and compare it with the grey block that represents GDP. Both are adjusted to real 2007 dollars. Even from the thumbnail image above, three distinct phases of their relationship stands out.

Between 1920 and 1950, the relationship is fairly steady. The narrowing of the gap over the 1940s is easily dismissed as the inevitable cost of WWII added to the accounts. These were the days of the massive Marshall Plan investments in Europe and Japan, so the glitch is justified.

Between 1950 and 1980, national debt remains level at around 2 to 2.3 trillion dollars, while GDP over that period triples. These are the golden days that baby boomers constantly refer to, and rightly so. Then there's 1980 to the present, where the lines remain parallel. All GDP growth has been derived from national debt. The only time the gap widens is during the 90s and the Clinton administrations run of surpluses, but otherwise it's pretty much constant.

Then take a look at the note below the globe: "The federal government doesn't follow the same accounting practices it requires corporations and state and local governments to follow. If it did, the actual national debt would be $59.1 trillion."

That's about six times the US GDP. Now would be a good time to give Roger Douglas, Ruth Richardson and even Michael Cullen a hand for getting and keeping NZ out of a similar situation. Even with the figures haemorrhaging out of Treasury or the Reserve Bank these days, they still pale in comparison with what the US is now facing.

Consider the $700 billion bailout plan. Where has the first $350 billion gone and at what price? No one seems to know. Have the banks inserted that money into the system or are they hoarding it? Seems like the latter. Should the car makers get a hand out or should two and a half million jobs reliant on them be put on the block? Maybe the over-excited Ashton Kutcher was right on the last Real Time with Bill Maher for the year. Maybe the oil companies should bail out the car companies, not the government. Vested interest and all.

And before the Republicans get too high and mighty over this dilemma, they might want to eye up that other inefficient job factory known as the military industrial complex. Or the war in Iraq. Suffice it to say, the US is inevitably facing a massive readjustment, the likes of which will make Rogernomics look painless.

Consider the state governments, facing massive blowouts due to declining revenues from sales, income and property taxes, face some hard choices. Say what you will about Colorado's experiment with TABOR, Gordon Campbell, but at least Colorado's budget shortfall is a puny $20 per capita. It's miniscule compared with California's $711 per capita, and that was before the bushfires.

Call me a pessimist, but things is the US are facing a god-awful crunch. This crisis isn't over by a long chalk. And just because there won't be identical images of 1930s soup kitchen lines, doesn't mean that a depression might not be on its way. It would look different, as Drake Bennett at says:

Most of us, of course, think we know what a depression looks like. Open a history book and the images will be familiar: mobs at banks and lines at soup kitchens, stockbrokers in suits selling apples on the street, families piled with all their belongings into jalopies. Families scrimp on coffee and flour and sugar, rinsing off tinfoil to reuse it and re-mending their pants and dresses. A desperate government mobilizes legions of the unemployed to build bridges and airports, to blaze trails in national forests, to put on traveling plays and paint social-realist murals.

Today, however, whatever a depression would look like, that's not it. We are separated from the 1930s by decades of profound economic, technological, and political change, and a modern landscape of scarcity would reflect that.

...[A]bove all, a depression circa 2009 might be a less visible and more isolating experience. With the diminishing price of televisions and the proliferation of channels, it's getting easier and easier to kill time alone, and free time is one thing a 21st-century depression would create in abundance. Instead of dusty farm families, the icon of a modern-day depression might be something as subtle as the flickering glow of millions of televisions glimpsed through living room windows, as the nation's unemployed sit at home filling their days with the cheapest form of distraction available.

In other words, life would be the soul-crushing isolation of the unemployed trapped at home, the supposed nirvana that some right wing blogs describe as bludging. Welcome to my world. Believe me, it's not that glamorous.