Monday, March 31, 2008
Good news about the economy
I've been meaning to write a comprehensive post on the fallout to expect from the U.S. economic situation. But aside from the fact that I'm lazy and that even a cursory description would run on for pages, I doubt that readers would have the stomach to read it. So let's look at the upside, which is considerably briefer.
The greatest short-term benefit of this debacle may be an end to the Iraq war. At the Presidential level, I hold no hope that Barack Obama will bring the occupation of Iraq to a swift end1—and that's ditto for Hillary. John McCain's prescription for ending the occupation is to intensify it. The House and Senate, many of whose members were (or will be) elected to end the war, will find the money from the defense industry irresistible.
The truth is that we did not have the money to go to war in the first place. But like home owners who took out loans and mortgages on the expectation that the value of their assets would rise to cover the debt, the Bush administration believed that the costs would be more than offset by the profits to be reaped from gaining control of the world's second largest oil reserve. From a longer perspective, it was hoped that establishment of permanent military bases in the heart of the Middle East would consolidate U.S.–Israeli hegemony in the region and guarantee the flow of even greater profits. Fortunately or unfortunately, the anticipated gusher did not come in. Recently the cost of the war has been conservatively estimated by Nobel economist Joseph Stiglitz to be around $3 trillion.
It will be increasingly difficult for politicians to explain to the baby-boomer generation that their Social Security and Medicare are in peril because the money to fix the problem has been wasted on a useless war. In fact, this indisputable fact may come as a saving grace to the Democrats, who in addition to their own propensity for graft simply cannot allow themselves to be called "defeatists" and pussies. They will have a firm economic ground for ending the war, and that ground will not shift no matter how much name-calling the Republicans engage in.
Have you been driving less lately? If so, you're not alone. People are beginning to consolidate errands to save gasoline, walk or bicycle where possible and avail themselves of that socialist vehicle known as public transportation. These trends will continue.
A recent auto show found that people were far more interested in increasing their mileage than in upping their tonnage. SUVs are becoming déclassé, and if you own a pick-up, you'd better keep some hay in the back of it. The deal just announced by India's Tata Motors to buy the gas-guzzlers Jaguar and Land Rover from Ford proves that you don't have to be an American executive to be stupid. The immediate result has been a drop in the company's credit rating. (Don't be surprised if the deal falls through.)
These are exactly the same consequences—including less profit for American automakers—that would have resulted if the government had taxed gasoline to approximate the environmental cost. But the money will now go to petroleum megacorporations or overseas. While the opportunity to bolster government coffers has been lost, the reduction in the American "carbon footprint" should be tangible. Maybe Bush was right—we didn't need Kyoto after all.
Then there's food. The diesel used by truckers now costs more than gasoline, and transportation is said to account for 10% of food costs. Grocery chains will be "incentivized" to buy food produced closer to home, and the farming industry will find itself suddenly attracted to the benefits of organic production, since the cost of petroleum-based fertilizers can be expected to rise. In addition to its doctors, Cuba may find itself with another valuable export—organic agriculturalists. And finally we may see a renaissance in home gardening reminiscent of the "Victory Gardens" of World War II.
The trade treaties signed with Latin America may in the end have less impact than we feared. For instance, asparagus coming to the U.S. from Chile could be speared with a hefty price tag. Many consumers may decide to wait until spring when they can buy it at the local market.
In February a "milestone" was announced. According to the Pew Center on the States,
For the first time in history more than one in every 100 adults in America are in jail or prison—a fact that significantly impacts state budgets without delivering a clear return on public safety....
As prison populations expand, costs to states are on the rise. Last year alone, states spent more than $49 billion on corrections, up from $11 billion 20 years before. However, the national recidivism rate remains virtually unchanged, with about half of released inmates returning to jail or prison within three years. And while violent criminals and other serious offenders account for some of the growth, many inmates are low-level offenders or people who have violated the terms of their probation or parole.
With state budgets in freefall the attraction of locking up more and more citizens is beginning to pale. Even Texas, which is the leading incarcerator among the States, countenanced a miniscule "dip" in its prison population last year. There's a substantial possibility that the U.S. will cede its preeminence as the world's leading incarcerator to one of those other bastions of freedom, the Russian Federation and China, which have plenty of cash on hand.
I do not know, from a sociologist's perspective, all the reasons that the citizens have remained torporous in the face of the appalling facts cited above. But one reason does not require a study to ferret out—they're too busy working. In fact they're working too hard to stay even minimally informed. But take away their homes and their jobs and they'll be looking for some answers.
We've had a taste of this in the past few weeks. I was quite surprised to see a demonstration at the Bear Stearns headquarters after the announcement of the government bailout. Not only did this protest receive wide coverage, but unlike antiwar protests, the stories were quite friendly. Take, for instance, this NY Daily News account—
About 150 seething homeowners forced their way into Bear Stearns' midtown headquarters Wednesday - furious that tax dollars were used to bail out the beleaguered investment firm.
Chanting "Help Main Street, not Wall Street!" the protesters poured into the E. 47th St. building, pushing passed two burly security guards who tried to keep them from barreling through the revolving doors.
Inside, the raucous but orderly demonstrators chanted, waved signs and blew horns as a crowd of stunned bankers looked on.
The demonstrators shuffled out of the lobby at about 1 p.m. after a phalanx of cops gathered outside. No arrests were made.
Bruce Marks, founder of the homeownership organization, called the protest an extraordinary success.
"The security guards couldn't stop us," he said. "We took over their house."
Wow! No description of what the people were wearing. No implications that the group consisted of the idle homeless. And no "balance" at the end of the story to show how pointless it all was.
Or take the independent truckers. They're talking about a one-day strike tomorrow to protest the price of diesel. And just talking about an unorganized strike is big news in the United States.
When my story from last week about plans for a truckers’ strike appeared Monday on the high-traffic Drudge Report Web site, the calls and e-mails poured in.
I heard from CNN in Atlanta as well as small-time radio stations across the nation. I hung up the phone after listening to a dozen new messages and had four more come in during the few minutes I was tying up the line.
The potential impact of this thing is tremendous, and people are beginning to notice.
The call for a drivers’ shutdown started small — with an owner/operator who hauls cattle in Missouri. The trucker, Dan Little, posted his plans to shut down on his Web site, and someone brought it to our attention at the Times.
Now it’s been brought to the attention of thousands, and Little’s plan to park his rig, beginning April 1, has truckers lining up across the nation to join him.
Several non-truckers wanted to know how they could help the drivers, and some people said they would park their passenger vehicles in a show of solidarity.
A clear majority of the people I heard from were sympathetic to the drivers....
Little has said that the last thing he wants to do is hurt the country that he loves. Truck drivers are some patriotic folks, he pointed out. But many feel backed into a corner by the threat of bankruptcy.
“All I know is that I have to take a stand,” he said. “My livelihood is at stake.”
As I was finishing this column, Betty Cornette called from Louisville, Ky., and said that her truck-driving brother has had to call it quits because of fuel and insurance costs.
She made this prediction: “Everybody’s going to have to suffer before they understand what’s happening to these truckers.”
"Show of solidarity" with the truckers? It's all quite cheering.
We're not talking about liberals here. Aside from the neocons, who could be more pro-war than the independent truckers? Will they get the message that a major cause for the rise in their fuel prices is the war? And which will they prefer—the war or their livelihoods?
And an investment tip
Readers who were around to enjoy the Sixties will undoubtedly remember this famous bit of dialog from The Graduate—
Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.
It's time to adjust your portfolio. You can forget plastics—they're petroleum-based. To paraphrase Mr. McGuire, I have just one word for you—SOUP. We're going to be eating a lot of it.
1You may remember last month's brouhaha about Barack's campaign advisor Samantha Powers calling Hillary "a monster." But she revealed something far more important in her interview with Stephen Sackur—
Sackur: So what the American public thinks is a commitment to get combat forces out in 16 months isn't a commitment, eh?
Powers: It’s a best-case scenario.