Eric Blair,Activist Post, August 22, 2010

The economic debate has been going on for decades: if only we give more money to the wealthy Elite, they will create jobs and some crumbs will trickle down to the hungry public. Many in the middle-class herd bought this carrot in hopes of heehawing their way into the next tax bracket.

The Elite are flush with cash, but they refuse to spend it until consumers start spending — like a game of Chicken.

Indeed, this approach may have been effective during the industrial revolution when entrepreneurs used the capital to open American factories. And surely this method can also work if fair trade agreements existed that would motivate job growth at home, but that is just not the world we live in anymore.

These days it seems ludicrous to give the international robber barons even more when they have exited the U.S. manufacturing stage and have no intention of returning. They also seem to have no intention of investing in America until public consumption resumes — admitting that middle-class consumption drives domestic job growth, not them with even more money in their already fat pocketbooks.

The Washington Post reported Friday in a revealing article titled, “With consumers slow to spend, businesses are slow to hire.”

Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they’ve yet to amp up hiring or make major investments — the missing ingredients for a strong economic recovery.

Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.

But here in the heartland of America, senior executives say neither side’s assessment fits.

They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.

In other words, if we could only get more money to the consumer-class so they can spend it, then maybe then we can create more jobs. The article stated that David Speer, CEO of Illinois Tool Works which employs 60,000 people worldwide, “As long as U.S. consumers remain deeply strained, he is unlikely to undertake aggressive expansion.”

Siemens Industries’ CEO, Daryl Dulaney, was also quoted as saying ”It’s a different era. Our hiring and investment decisions have to be prudent and reflect that.”

Dr. Paul Craig Roberts, former Assistant Secretary of Treasury in a scathing article this week, describes this “different era” and how Globalism and transnational corporations have mutated ” the New Economy:”

Wall Street and shareholders and executives of transnational corporations have made billions by moving 39% of US manufacturing offshore to boost the GDP and employment of foreign countries, such as China, while impoverishing their former American work force. Congress and the economics profession have cheered this on as “the New Economy.”

Bought-and-paid-for-economists told us that “the new economy” would make us all rich, and so did the financial press. We were well rid, they claimed, of the “old” industries and manufactures, the departure of which destroyed the tax base of so many American cities and states and the livelihood of millions of Americans.

The bought-and-paid-for-economists got all the media forums for a decade. While they lied, the US economy died.

And in Robert’s another article this week he describes how the tax and cut debate is flawed in this New Economy:

Perhaps economists lack imagination, or perhaps they don’t want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot-com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15 per cent of their earnings all their lives, would result in starvation and deaths from curable diseases.

Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet — thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution?

Ah, but we will tax the rich. The rich have enough money. They will simply stop earning.

In July I wrote, “The deficit panic mode is ramping up the rerun political show as fiscal conservatives echo the age-old mantra ‘cut taxes and spending,’ while the progressives pretend to be for the little guy and demand more public spending. However, every economist (and central banker) worth their salt knows that when the money supply contracts, the economy goes into a depression — while expanding the money supply to the consumer class stimulates economic growth.”

Although the monetary base has spiked off the charts, mostly to absorb toxic financial products by bailing out the banks, the supply of money has not yet trickled into the real economy. The Elite are flush with cash, as the Post article states, but they refuse to spend it until consumers start spending — like a game of Chicken. And as Dr. Roberts wrote, the rich “already have enough money” and are unlikely to invest it domestically in this “New Economy.”

Since we have bailed out the top (banksters) with flawed hopes that they will begin lending again, it seems the money would have been better spent going directly to the consumer class without the Elite filter. This would have directly added money supply into the real economy instead of being hijacked by the criminal financial system that caused the collapse.

Unfortunately, because of the engineered deficits to feed the military-industrial complex, off-shore multinationals, and the banksters, we no longer have enough resources should the states or average Americans need help — but the wars are likely to continue and Social Security is likely to be cut.