In my concluding paragraph of Part IV I said: “In my next post on this subject, I will address why in this recession raising taxes on the rich will not hurt the economy, while reducing spending will, which is the opposite of what Republicans and our media is telling us.
Now I know that what I am about to address is already the accepted conclusion of most of my readers, though probably not all, but keep in mind that the purpose of my blog is not to rest on “truisms," but to examine the facts, and to make sure that we do not fall into the same trap that Tea Partiers adhere to, That is “I have my opinions don’t bother me with the facts.” I want to provide the facts, because I believe that opinions, not backed by facts are worthless.
With that preamble, allow me to address the subject and again I quote from impeccable non-partisan sources not liberal ones. Thus from Market Watch, a part of the Murdoch empire:
As of the first quarter, non-financial U.S. companies held $1.84 trillion in cash, a whopping 27% more than in early 2007 before the recession. Yes, it's good to have a rainy-day fund but at some point companies have to put that cash to work hiring new employees or buying equipment or expanding operations.
So clearly it is not lack of resources that is preventing hiring. So why would tax cuts, which would increase that which they already have in abundance, cause them to behave differently. It defies logic. Similarly if they paid more taxes and their huge stash of cash were reduced, how would that effect anything, except maybe there tendency to make more acquisitions, which generally result in a reduction in jobs as part of reducing “redundancies” after a merger.
So what is keeping them from hiring? The purpose of hiring people is to produce more goods to meet demand. Clearly, if there is no demand, no company would want to increase supply. In fact we wouldn’t want them to, for an excess supply over demand causes prices to go down, causing deflation, which is precisely what we must avoid.
On the other it has been argued that we need to cut spending, but Ben Bernanke, a Republican, appointed to head the Fed. by George W. Bush recently said:
… overzealous cuts to government spending could derail an already fragile recovery and … a U.S. debt default could wreak financial havoc.
But finally, with the maniacs (also known as the Tea Party) on the verge of blowing up the US and world economies, Nancy Pelosi speaks which true to form is not reported widely by the media. See here for audio.
Allow me to quote her speech in part:
This isn't about deficit reduction, this is about dismantling the public sector," she said. "If our purpose is reduce the deficit, we certainly can do that. If our purpose is to dismantle progress in the middle class, we won't be a party to it."
See here for the text.
And finally Paul Krugman, who so often in his column saw the ideal, but never the practical, and never could come to grips with political reality speaks wisely and insightfully:
The facts of the crisis over the debt ceiling aren’t complicated. Republicans have, in effect, taken America hostage, threatening to undermine the economy and disrupt the essential business of government unless they get policy concessions they would never have been able to enact through legislation. And Democrats — who would have been justified in rejecting this extortion altogether — have, in fact, gone a long way toward meeting those Republican demands.
As I said, it’s not complicated. Yet many people in the news media apparently can't bring themselves to acknowledge this simple reality. News reports portray the parties as equally intransigent; pundits fantasize about some kind of “centrist” uprising, as if the problem was too much partisanship on both sides.
Some of us have long complained about the cult of “balance,” the insistence on portraying both parties as equally wrong and equally at fault on any issue, never mind the facts. I joked long ago that if one party declared that the earth was flat, the headlines would read “Views Differ on Shape of Planet.” But would that cult still rule in a situation as stark as the one we now face, in which one party is clearly engaged in blackmail and the other is dickering over the size of the ransom?
The answer, it turns out, is yes. And this is no laughing matter: The cult of balance has played an important role in bringing us to the edge of disaster. For when reporting on political disputes always implies that both sides are to blame, there is no penalty for extremism. Voters won’t punish you for outrageous behavior if all they ever hear is that both sides are at fault.
Next time: What can and should we do about the deficit and the imminent insolvency of Social Security, Medicare, and Medicaid? Where can we and should we cut?
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