This article originally appeared on PolicyMic on 11 August 2011.
When buying a dishwasher, a factor not likely to be considered is how the dishes will get washed after the machine breaks, as every dishwasher eventually stops working at some point. So it is with every machine or system. There is nothing in this world that, once created, works forever without end.
Americans believe deeply that low taxes, less regulation, and capital in private hands will translate into economic growth. As a general idea, this has arguably proven true, but there are reasonable limits. It is recognized that taxes must be high enough to fund necessary government activities, though it is debatable what those necessary activities are. Our economic system, like a broken dishwasher, is in need of repair. The symptoms are well-known, and it was inevitable that it would happen sometime. To fix it, things will have to change, at least until the problems have been resolved.
Our largest banks understand that they triggered this recession. Some argue they can regulate the problem themselves – that would be plausible, if this were just a downturn. Instead, we have an international crisis that has driven major banks to extinction and shaken the world markets. These banks turned to government to save them from ruin. They pleaded for government assistance, citing certain collapse if help were not provided. It is because of this that new regulations are needed for the immediate future. You don’t fill up the tank again without fixing the leak first.
The debt is a problem and has been for a while. Taking radical measures is ill advised during a recession, if not always. The world was not worried about America’s debt until Republicans started screaming about it; we were not in danger of a lowered credit rating until we earned it by shaking world confidence.
To fix the debt problem, the easiest, most efficient, and most commonsense way to go about it is to cut government spending in the few places we can afford it as well as increasing tax revenue. This will undoubtedly calm the markets. The policies would not be permanent, but they are needed until the problem is fixed. Failing to do both is a half-assed approach that will do nothing to improve our economic situation.
Businesses are laying-off workers and freezing spending to save cash, and citizens should not get the same treatment from their government. A business can think only about its own survival; government must think about its citizens’ survival. Unfortunately, this may require government to spend money as a safe guard while the private sector recovers. Unemployment must be lowered before making deeper cuts to reduce debt, and when government spends, the money comes into private hands.
These are components of one large, interconnected problem. Unfortunately, many politicians see it as piecemeal, smaller, and separate problems and are treating it as such. They’re trying to fix the machine by hitting the buttons harder or plugging it back in. Regulation must prevent financial excess from happening again, and the debt must be reduced through increased revenue and cuts. At some point you have to get serious and fix what’s broken. After that, life can go back to business as usual.