It's the Economy, Stupid.

I think that one of the strangest things of this electoral season is the tacit agreement not to deal with the elephant in the room: the economy. It is all the more strange when Bush actually does discuss the economy (which he is trying to do more now since his usual Iraq speeches are starting to sound old) he does so in rosy terms that seem to belie reality. Recent news that the DOW broke the 12,000 record seems to be hiding two important things about this economy that no one wants to talk about: One, if you aren't heavily invested in the stock market then you aren't likely to feel this 'booming' economy fatten your wallet. Two, the US is heavily in debt (several trillion dollars in debt) and our economy is in for, depending on your optimism, a soft but still downward landing or, dare I say it, an out and out recession.

The only thing in this economy to bounce back lately is the price of stocks. But the value of the NYSE is not always an indicator of economic health. While US unemployment remains low by European standards, the absence of a real safety net makes unemployment much harder here. Moreover, job growth was consistently under official predictions until we started to 'adjust' our expectations. Much of the money being made and fattening those stock dividends is what ultimately hurts workers. We are outsourcing (not something I completely abhor, mind you), selling off businesses, downsizing others, and stalling if not rolling back wages (the disgustingly upbeat assessment that wages made a 'modest gain' last quarter hides the decades long downward trend adjusted for inflation).

While academics have long wrestled with the sustainability of capitalism (it isn't considered sustainable, by the way, but we won't see its collapse in our life-time), few people seem to be questioning the sustainability of current economic and budgetary practice in the US. We are awash in debt, people. The only reason our economy is still floating and hasn't suffered a massive adjustment in currency valuation is because Asian central banks have been purchasing treasury bonds to keep us afloat (they do so because if our currency devalues their exports would suffer). Budget deficits and trade imbalances are approaching scary levels. Sure, this is bad news for the US, no doubt, but it is also quite dangerous for the world. Much of the world relies on our consumer happy practices to buy all the crap the global economy produces (though the trend is moving toward Asia now). So if, following Milton Friedman, we were to allow for the correct market mechanisms to right our budgetary and trade woes the economy would likely tank and drag much of the world with it. (So you free market libertarians, take note).

We have a saying in political economy. If you owe the bank several hundered thousand and can't pay it back then you have a problem. If you owe the bank hundreds of billions and can't pay then the bank has a problem. This is the sort of world we are quickly approaching in the US. And it seems that the only person who is willing to point out that we need to make serious economic adjustments is the one guy NOT running for office- the head of the GAO. Given his 15 year appointment he can afford to point out the bad news. And what is that bad news? The economy is shit and to fix it we need to act now.

We need to forgo some of the tax breaks that have not 'trickled' down from the wealthy few (the economic rationale, long discredited, for this was known as the laffer curve and it is, well, laughable). We will likely need to cut the budget too and start rethinking some of our current practices that simultaneously hurt business and the budget. For example, Medicare and Medicaid are set to run perilously low on cash in the coming years (not that they aren't crap now). Similarly, the biggest overhead cost of Fortune 500 companies is healthcare. GM can, all things equal, spend less to make a car in Canada than the US simply because of insurance costs. It makes sense to install a single payer insurance programme to fix this (not to mention that it seems criminal to spend, per capita, around 9 grand on health care with 46 million remaining uninsured. Per capita spending in Canada is under 3 grand and everyone is covered).

This is just one example but, in short, none of the things that we need to do to fix the economy are being discussed this election (and likely not during the next one either). Politicians talk up the economy when it's good, blame their opponents when it isn't but rarely are real solutions discussed. Historically, economic hegemons rise and fall when other countries seize the weakness that strength has bred into the powerful and use it to build their own economic strength. The hegemon, whose power rests on an outdated mode of thinking and the heavy structural commitment to outdated practices eventually falls. If the US is to move forward it will need to abandon some of the current thinking dominating not only the government but the minds of the people as well. This isn't a call for free markets, mind you. But it is a call for fundamentally rethinking how we do things in this country. I don't know fully what that entails but for one the costs should not be borne by those already shat upon by the economy. The costs will need to be shared but fall more heavily on those hundred million dollar retirement packages for ex-CEOs.

Fortunately for the global economy many other countries are starting to move away from a dependence on the US to keep it afloat. So, when it tanks the world may not be as bad off as we fear. Solution? Move. Or, if you don't want that then start demanding we deal with the economy and recognise that adjustments will be painful.