Hi Bill,
What follows below is actually the short version of my response to you (!). I’ve whittled it down as best I can. I believe we have a philosophical political difference here which goes to the core of our belief in the role of government.
First, the only part of your description of the economic downward spiral that I would expand upon is that the downward spiral was a long time in building, it was something people saw reflected in their own towns and their own wallets for the past decade. I do believe, however, that it wasn’t until 2008-2009 that people appreciated how deep our problems really were and that it would hit them so harshly. Too little attention too late…
Where you and I differ is how to get out from under the burden. I do not believe the answer is to spend our way out, nor do I believe that expanded Government intervention is the answer. If I go into debt to support a lifestyle beyond my means, I would not double down and go into even deeper debt, nor would I expect a parent [govt.] to bail me out, and I certainly would not ask my neighbor [taxpayers] to pay my bills. I would reduce my spending. If I want to spend more, I need to make more money. I need to produce something of value to sell to someone who wants what I make. I want my government to do the same.
You mention that “Governments should spend more when they have less and save more when they have more. Massachusetts has part of the answer in the rainy day fund”. If only government really worked that way…
The problem with government is that unless reined in, it spends more when it has less and then spends even more when it has more. It’s even worse at putting aside reserves than the average individual. Take for example the bank bailout money. The law as written requires that monies paid back must be used to reduce the deficit. Repaid money was pounced on for additional spending so fast I think the politicians in Washington got whiplash. As for the Massachusetts rainy day fund, we can thank Speaker Finneran for having the wisdom to force that through. It wasn’t an easy sell and ever since the money has been leaving the account fast without replenishment keeping pace. I think the estimate I heard was that at the present rate it’ll be gone in two years.
With the federal bailout and stimulus plans, I believe our legislators did not listen to their constituents, did not read and comprehend the very bills they were passing, did not thoroughly study the future financial impact on the economy, and are even now ignoring their own laws. I heard a number the other day that I still can’t wrap my head around: with the national deficit ceiling raised to over $14 TRILLION, the debt works out to over $400K per every American [citizen? household? Can’t remember which but with numbers this big either one is scary…]. It is probably impossible to pay back that debt within our lifetime…maybe not even in our grandchildren’s lifetime…
You mention that “Eventually, once the economy enters a new, positive feedback loop, tax revenues should increase and the debt can be paid down”. Here’s where my faith in the recovery varies from yours: I believe a real recovery will be excruciatingly slow, I believe the tax revenues will be merely a drop in the deficit bucket. The tax revenues were never large enough to satisfy spending prior to the meltdown…and if you raise taxes to generate additional revenue to address the deficit, you’ll quash the very recovery you’re trying to support.
As for jobs created under the stimulus bill – and the possible second jobs bill – I guess how you measure its success has a lot to do with how you define the “jobs created”. I thought the stimulus was to encourage new, stable, long-term jobs in the private sector in sustainable industries. Sorry, I don’t consider solar energy one of those…I’ll tell you why. I can remember as far back as when I was in 7th grade (and that’s a long time ago) hearing in science classes all about how solar energy would revolutionize the cost of energy. But the investment required to install these is large and the payback slow. I just had an energy audit done on my home a week ago…they don’t even bother talking about solar energy on residential homes unless you push the topic…
So my take on solar energy is that its best use is for commercial or industrial facilities. That’s why the stimulus expenditure in Massachusetts was for water treatment plants, not private homes. And I just heard this morning that Mayor Manzi in Methuen is talking about a solar panel project for at least one municipal building. I am convinced that how long those jobs will last or how long the ancillary benefits you mention will last is questionable…they will only last beyond the stimulus project if there is a market out there to purchase the equipment. I don’t see a lot of developers clamoring for solar installations yet…I don’t see a lot of commercial development of anything right now…what I do see is municipal interest which, I must admit in a cynical feeling, I believe has more to do with political appeasement and having taxpayer dollars at hand rather than careful fiscal planning.
What about those savings to the municipalities? Here’s the part that makes me wary about any jobs or revenue numbers coming out of the Governor’s office. He has a history of hyperbolic job and revenue projections [remember the Casinos?]. The stimulus funding only pays for the installation of the solar panels…what is the cost of the maintenance/upkeep going forward? How old are these facilities? Could the same cost savings and creation of jobs have been realized by updating current or more traditional systems without spending $20 million of borrowed money to do it?
Instead of being a nation with a robust manufacturing sector, we’ve become a nation of consumers who no longer produce consumable goods valued by either domestic or global consumers.
Ultimately, for me, the solution is giving private citizens and private industry the flexibility to adapt, innovate, and create new products for new markets…stable jobs for sustainable private sector recovery.
I was pleased to see the story about Liberty Mutual in today’s Globe:
http://www.boston.com/business/articles/2010/02/12/liberty_mutual_sets_hub_expansion/
The City of Boston, willing to trade reduced tax revenue for 600 jobs and a jolt to the building industry, stands to gain a whole lot more for long-term growth. And they won’t have to borrow a dime to make it happen.
And finally, I did vote for Deval Patrick and have been disappointed from the get go. I see a lot of things and hear a lot of things in meetings with legislators, elected officials, and activists from all over the state. Here’s what I think of the Governor’s proposed protection of local aid: it’s a calculated political strategy during an election year. It just shifts the dirty work onto the House and Senate. Under the Governor’s budget, keeping local aid intact is only achievable if revenue or deep cuts elsewhere in the budget support it; revenue isn’t looking good and his new tax on candy and soda is dead on arrival at Beacon Hill. Gov. Patrick is not a stupid man; he knows that if the legislature cuts local aid he can say it wasn’t him. If the legislature plays along, and if he is re-elected, he can wait and ask for 9C cuts after the election. I wouldn’t put too much faith in his promises at this point…if you look at the Town Manager’s recommended FY11 town budget or the Revenue & Fixed Costs Committee’s report, you’ll see that they aren’t…
Bill, I would really like to believe that your view is correct rather than mine, because mine is very scary right now. I could use some good news to sway my opinion in your direction…I’ll keep looking for it…
Sincerely,
Sandy
. The trail of economic transactions that follow the government spending of $1 merely replaces the same trail of transactions that would have occured had that dollar been left in private hands and spent privately. Actually, it is a diminished trail since the government usually makes less intelligent spending choices than the real owner of that dollar would have made with his/her own money.