It's over. It's finally over. The government is going to open once more. Pundits everywhere will tell us that they did it to save us. Maybe. They know that the default would have been bad if had been allowed to happen. But this is only a reprieve as the GOP would only give us a few months so that they could get another shot at Obamacare before the midterms next year.
No, this isn't about saving us. This is about saving them. Who are they? The elite who pretend to be so much better than the rest of us. The billionaires who say that they have the sole right to manage the world without so much as a peep from the rest of us. No, this isn't about saving us, not by a long shot.
You may well remember the subprime mortgage crisis of 2008. That crisis wiped out about $900 billion in annual economic demand every year since then. The people did not get bailed out like the banks did. The banks got their money and more while the people were left holding the bag. But that crisis is a symptom of a much deeper problem.
Let's start with the minimum wage. The minimum wage has not kept up with inflation. It is actually worth less in real dollars, dollars adjusted for inflation, than it was worth in 1969. It is rarely adjusted, and when it is, only begrudgingly. Our current federal minimum wage is $7.25 an hour. There is serious discussion about raising it to $10 an hour. Analysis of the current minimum wage indicates that if the minimum wage had kept pace with inflation, it would be about $22 an hour.
Minimum wage is a driver of economic demand. When people have more money, they spend more. Businesses would like to tell you that they are job creators. Well, maybe, but they need customers and if customers don't have money, businesses don't have customers, and they can't create jobs. It's like that. Consumers are the real job creators.
All the philosophical pandering and hand waving over Obamacare is not even about protecting the American people from the harms created by Obamacare. It's proving to be very popular, even in Red States. There was talk about forced charity. What charity? The very idea that a man should pay a tax if he refuses to buy health insurance. That's the charity that is bandied about in the social networks. But if a man doesn't have insurance, winds up in the emergency room and doesn't have the money to pay, who pays? The government. Charity is in the eye of the beholder now, isn't it?
Even then, the debate over Obamacare didn't hold a candle to defaulting on the national debt. Now there is an interesting topic for conservatives. The government sells debt to raise money when taxes generate less revenue than the government spends. Why do we have a national debt? For many years, the government has been spending much more money than it takes in.
This has served very well for the Conservative Nanny State. First, it provides a great safe haven for people with money. Lots of money. Tell me, do you know anyone personally who has a Treasury bond? Anyone? Who can afford to put some of their money away for a year, 5, 10 or even 30 years? Very wealthy people can. This is a great deal for the very wealthy and for that reason, I doubt if any Republican truly wants to eliminate the debt.
The national debt serves another purpose: maintaining the dollar as a reserve currency. When other countries buy dollars to hold in reserve, they could exchange their currency for dollars, but what they really like to do is buy bonds. Billions in bonds have been sold. China holds $1.6 trillion in bonds, so they own a big chunk of the US debt.
Who knows why China buys bonds? I do, I do! I learned it from an economist, his name is Dean Baker. Baker makes an interesting point. The reason China buys US debt is to hold the currency in reserve, but more to the point, to prop up the value of the ollar in relation to the yuan. This is an immense lever on the relative value of our currency, and has driven manufacturers to China for decades. China isn't the only one. Since the Asian financial crisis of the 1990s, all Asian countries hold significant reserves of US dollars. At first it was to meet the austerity measures imposed by the IMF. But they soon found that holding US dollars reverses the balance of trade in their favor.
With the balance of trade in reverse, Daffy Duck style, Americans have to work much harder to make money. Well, not all Americans. Some Americans are more American than others, so these special people have the privilege of sending our jobs overseas to make products that they sell here. With labor costs under control, it's just a matter of advertising and sales, then the checks just keep coming in.
The gains from productivity at home and from abroad have all gone to the top 1% and above. More than 90% of those gains went to the top 1%. For the rest of us, we get to scrap amongst ourselves to find a way to earn more money. But if the balance of trade were equal, we wouldn't need stock and housing bubbles to juice the economy. If the gains were more fairly distributed, we still wouldn't need bubbles to juice the economy. But for the last 30 years, the gains from productivity and international trade have all been distributed upwards, to the top 1% and beyond.
So if someone tells you that Congress averted default to save us, you can point them to articles to like this one that show the problems posed by a strong dollar and the imbalance of trade that goes with it. The trade imbalance is not an accident. Avoiding default simply allows the imbalance to go on indefinitely. That is what our tax dollars are paying for right now.
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