TORONTO—Twenty years ago, the American economy was in the third year of a deep recession.
But help was on the way. Something called the World Wide Web appeared in 1991. Two years later, the Internet boom began and tens of millions of Americans collected higher paychecks. Consumer spending and tax revenues exploded.
When Bill Clinton left office, the Office of Management and Budget projected a $5 trillion surplus over the next 10 years--enough to pay off the national debt and fund Social Security for decades. Unemployment had fallen to 4 percent, and the U.S. GDP accounted for a quarter of the global economy.
It's different this time. We are in a deep depression. Calculated the same way as it was in the 1930s, the unemployment rate is the same as it was in 1934. Global credit markets have stalled. Investment has ceased. No one knows where the recovery will come from for a simple reason: It isn't coming. Not any time soon.
"A robust rebound in retail sales earlier in the spring had fueled hopes that consumer spending--which makes up about 70 percent of U.S. economic activity--would give a strong lift to the recovery. But now that is looking increasingly unlikely," reported The Los Angeles Times.
Forget about Congress. The feds wasted hundreds of billions of dollars on bailouts. Meanwhile, the stimulus that needed to happen--bailing out homeowners, small businesses and individuals--never happened. Now Congress is worried about the deficit. So read my lips: no new bailouts.
Some think the United States could export its way out of the depression. But a radical restructuring of trade agreements and infrastructure would have to come first, followed by years of expansion. Moreover, the rest of the world isn't in a position to buy our stuff. The rate of expansion of the economies of China and Japan is slowing down. Germany and other European Union nations are imposing austerity measures.
Globalization is key. Writing in The Wall Street Journal, John H. Makin argues that the actions of individual G20 nations threaten to bring the whole system crashing down in a Keynesian "paradox of thrift."
Makin says: "Because all governments are simultaneously tightening fiscal policy, growth is cut so much that revenues collapse and budget deficits actually rise."
Adds Mike Whitney of Eurasia Review: "[President Barack] Obama intends to double exports within the next decade. Every other nation has the exact same plan."
One can hardly blame workers for fighting back. Two weeks after protesters rioted at the G20 summit meeting, Toronto police are pouring through photos to track down offenders. Whether the anti-globalization protesters are motivated by the struggle for liberation and economic equality, they symbolize the best chance to save the economy. If the system cannot be saved, it must be revamped and replaced.
If the cops were smart, they would track down and arrest those who are ruining the economy. They could start by releasing the photos of the G20 attendees.