Thursday, November 29, 2012

Fire Everything!

There's a scene in the Star Trek reboot movie where the bad guy, Captain Nero of the Romulan mining ship Narada, sees that his entire plan for retroactive revenge on the Federation is going pear-shaped.  As you might imagine, a guy who's dragged his entire crew into the past to avenge the death of his planet (admittedly, that is a lot of trauma to deal with) can be expected to display some epic emotional outbursts.

As Spock pilots a tiny, high-velocity spacecraft full of dangerous materials on a collision course into the Narada, Nero bellows, "Fire everything!"  He commits everything he has against what he knows must be certain annihilation.

As in fiction, so in life.  The so-called "fiscal cliff" is rapidly approaching.  If we go over it, assorted automatic things happen: certain Bush The Younger tax cuts discontinue, assorted funding levels are reduced, certain tax rates go up.  If you're a Republican, rising tax rates are certain annihilation.  If you're a Democrat, cutting the budgets of assorted federal agencies like the National Labor Relations Board and the Social Security Administration are certain annihilation.  It sounds like it's a guaranteed bad day for everybody.

Why the fuss?  Because if we go over the fiscal cliff, economists say we're almost certain to enter another recession.  Here's where things get a little weird.

Economists teach a couple of things about recessions that are especially salient in this context:

1) Recessions are not always fully understood by the very people who are paid to study and analyze these things.

2) Recessions may be a necessary facet of modern economies.

If it's necessary and paradoxical and not fully understood and unavoidable, let's just pull out all the stops.  Fire everything!  Let's not just go over the fiscal cliff - let's dive over it.

Get the recession out of the way.  We just came out of one with the housing bubble, and a few nice things came out of that: banks aren't making ludicrous assumptions on future earnings of loan applicants, and so are less likely to create their own toxic debts, and also housing prices came down from their unreasonably lofty heights.  That's good for everyone.

Everyone, that is, except those people who actually listened to the creditors' siren songs of easy loans and earnings projections, only to find themselves entirely upside-down on gigantic houses they never had a reasonable hope of affording.  Consider that tuition on a lesson learned.

The dollar isn't especially strong these days.  No one can explain to me why inflation is an economic necessity - would deflation be so bad?  To have a dollar that buys a little bit more than it did last week, instead of less?  I understand stronger dollars would mean fewer exports overseas - so what?  We haven't been exporting that much overseas for quite some time now.  For some reason Buick is huge in China, but those cars are built in-country by Chinese labor and when's the last time you saw Japanese youngsters squabbling in storefronts for the hot new electronic devices from the US?

Right: never.

So go ahead and shrink the economy.  Reduce American workers' expectations a healthy amount.  Not that long ago minimum wage was only $3.50 per hour, but it was okay: a loaf of bread was only a buck.

We don't have to leap over the cliff and hit bottom the hard way.  Enact a few tax increases right now.  Nothing big.  Pare a percent or two off some funding budgets.  Give people a little time to adjust to the new load.  Then more tax increases, more spending cuts.  Get started right now, but you don't have to pop the clutch and go over the precipice like Thelma and Louise.  We can go over the fiscal cliff with a parachute, descending to a new, less-heady height at a measured pace.

But I think it's high time we had some contraction.  Inflation, expansion, biggerizing ad infinitum.  At some point it has to stop, at some point we must regain control of the economy instead of letting it continue to expand unchecked.  Things that expand too far burst.  Fire everything, make a few holes, let some air out.

NOTE: I am not an economist and know nothing whatsoever.  Yes, I am aware that recessions are "bad."


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