Looking Ahead

LOOKING AHEAD by Wally Dobelis Solving the debt ceiling shortage, rationally You may have noted over the years that this column is a bit ambivalent, dealing with both inner city and upstate NY problems, interests that do not always coincide, even within the same party. This writer is ambivalent himself, as explained in the words of Ogden Nash, who once confessed to be a Buddhist in the winter and a nudist in the summer. It is all regional, or dependent on location, location, as the realtors proclaim. Right now our extended weekend stay in the family’s cabin, deep in the woods 40 miles south of Albany, affects my attitudes. Today, shopping at the local IGA, equivalent of the Metro supermarket on Third Avenue near 17th, I was struck by the 4th of July vacation week specials, big on eight piece packaged frankfurters, reduced to 99 cents, while nearby orange juice half-gallons retailed at $3.50 , half a buck above the city price. And that was not the only higher priced necessity. I had some back and forth about this with a bakery salesman, stocking shelves, who helped me choose a loaf of Freihofers's multi-grain bred. He spoke of manufacturers' greed, describing how in a recession when people tighten their belts, the makers raise prices on necessities, to maintain their profit margins. This drifted into lost government jobs in New York State, 300 plus last month and another 400 coming. This is not the way to build employment - President Obama claims to have added 50,000 private industry jobs in June, but meanwhile budget -balancing state governments have discontinued 32,000 municipal and state positions, leaving a measly 18,000 gain. The stock market reacted immediately. This puny gain of jobs did send some right wing observers into more talk of the Obama recession, conveniently forgetting that their budget balancing act, cutting expenses by eliminating. government jobs, counteracts all efforts to increase employment. All sound economists, even the Chinese in their 2008 setbacks, increase their Keynesian money outlays, such as unemployment benefits and infrastructure jobs, to increase the multiplier driven consumption and help slowly raise production and employment. Subsidies, road, bridges and other capital structure jobs help, while cutting taxes for the rich takes money out of circulation. The necessary raising of the federal debt ceiling above the $14.3 trillion by August 2, 2011, the date by which the Treasury Department will gradually exhaust its ability to borrow money, is by now recognized by the Republican leadership, notably Minority Leader Mitch McConnell and Speaker of the House John A. Boehner. Without the increase of the ceiling , US government gradually will cease paying salaries, military pay, Social Security and other benefits, and more importantly, renege on paying its debt, both interest and principal . The world 's economic system, which fully depends on the stability of the US currency, (now that the potential rival, euro, is badly wounded), with loss of the dollar's value the international economy will go into rapid high inflation. While the Republican leaders have learned to appreciate the damage potential, with the aid of their banker friends, the anger- driven anti government and anti-tax Tea Party masses do not want to accept the facts. Fear of losing the support of their fidgety Tea Party friends accounts for the Republican leadership's inability to convince the troops to accept the principle of the compromise discussions started in the Sunday July 10 bipartisan meeting. It is quite evident that Boehner accepted the idea of an increase in tax revenue, but not one in the tax rates affecting the rich. The new congressmen - and some of the old - are afraid of offending their sugar daddies that pay for their campaigns. In light of the debt ceiling struggles the Congress should consider a tax reform as a tax income enhancer. President Reagan's budget director David Stockman, veteran of the 1986 tax reform , notes that hardly any corporation pays the high corporate tax of 35%, and that the tax code, ten times the size of the Bible, provides little solace, since it is stocked chock-full with exemptions. Corporate accountants manage to convert much ordinary income into 15% capital gains, and reforming that will buy much of the necessary budget relief. One general change would be most effective and much easier than cutting corporate exemptions, item by item. This is just one patriotic suggestions from the partisan Right, and there are more coming, from Senators Jon Kyl and McCain (R, AZ) and John Cornyn (R, TX) and more. Reflecting upon the supermarket discussion above, it is important to note that there still are , among both the blue collar and white collar workers, many of us who approach the economics of our country and the world with knowledge and concern, rather than erupting in general anger against the government and politicians. Good people of Washington, DC, please be worthy of our trust.