We Can Still Do Big Things

By Mitch Green

President Obama is fond of reminding us that, as Americans, we can still do “big things.” Indeed we can do big things, but will we? At a passing glance, in a moment’s earshot, the President’s sentiment seems encouraging. That is, until you appreciate the extent to which he has committed himself to applying that rhetorical device to the task of large-scale deficit reduction. To those left sane after watching the debt ceiling theatrics, or those lucky few immune to the mind numbing aspects of it all are scratching their heads wondering why on earth the President has chosen this task as his “big thing,” rest assured you are not alone. Perhaps the President has read Fight Club too many times and believes that pushing the US economy to the brink of self-destruction is a good thing. While it’s a good book, and far from Palahniuk’s best work, I’d remind the president that it wasn’t supposed to be taken literally. Whatever his reasons, I think there are better “big things” out there that we might set out to achieve. Other things that actually improve the conditions of our lives, not roll them back.

For starters, we might seize this moment as an opportunity to utilize the tremendous glut of idle resources, and build a national high speed rail system. We can do it on the same scale as we did for the highways, make them as fast as possible and offer the American public a genuine alternative to airline travel. Not to mention, modern rail infrastructure is a necessary step towards a post-fossil fuel economy. Yes, it will require hundreds of billions of dollars to build. Maybe a trillion or so. But, we’re talking about “big things” here! Besides, dollars are cheap and right now so are the resources required for its construction. If you don’t believe me, take a look at the latest weekly real traffic summary released by the Association of American Railroads. Looking more closely at their year-on-year summaries, you can see that rail traffic is flat, and appears to indicate the economy is settling into an excess capacity equilibrium. Capacity utilization is low, unemployment is high, so now is the time to put those resources to work.

To go along with this project, we might modernize our electric grid. A hydrocarbon free economy will require a 21st century grid capable of integrating wind power from West Kansas, hydropower from the Pacific Northwest, and any American household who has decided to produce more energy than they consume, while distributing it efficiently throughout the contiguous US (sorry Alaska and Hawaii). We can electrify these new high speed trains with concentrated solar power plants located in the SW, capable of generating electricity through the night by using molten salts as thermal storage, rivaling coal and natural gas as sources of baseline power. Will this new grid and these exotic power plants cost a lot of money? You betcha, but minting a few trillion dollar coins is the least challenging problem we face today. It will take an army of laborers and engineers to design and build these systems. Luckily, we’ve got legions of unemployed people skilled enough to execute this work, and we still excel in training the mind to solve problems. For now, at least.

It is true, we can still do big things. We still possess the capability, resources, and ingenuity to best nearly any obstacle. What we are running thin on, however, is patience for empty rhetoric, aimed at achieving nothing but first place in a race to the bottom.

Progressives, Mr. Obama, you are on notice. Those of interested solving problems would like you to focus your attention on the really big things.

13 responses to “We Can Still Do Big Things

  1. I recently discovered this website and I appreciate your efforts to demystify the federal budget. As a concerned citizen with a limited understanding of economics, I really appreciate your plain-English deconstruction of a subject that most in government would prefer we didn't understand. So if I understand you correctly, the whole deficit ceiling crisis is being manufactured where none actually exists since there is really no harm in increasing the federal deficit? And that what's really going on is that the President (and Congress too?) are so dependent on Wall Street for campaign contributions that they are creating a fake crisis to justify dismantling SS and Medicare?So this is really just a dog and pony show and we're not really in danger of losing our AAA rating?I don't doubt that such nefarious motives are at work here. I've read lot of polemics before but you are the first to provide an alternative explanation that actually makes sense. Keep up the good work!

  2. It's better than that. The AAA rating is largely irrelevant. The US government has no need to sell T-bills at all. It's a stupid outdated law.In fact it would be better for the US if the financial speculators who worry about such things got out of the dollar completely.Then its value would be set by real trade, not financial speculation.

  3. There's certainly a consensus on the Right that Govt's "share" of resources needs to be minimized, and that the social "safety net" should be privatized for profit. I'm not sure "conspiracy" is the best word to describe that problem. I tend to think of it as "flat earth economics."Hard to say how much the financial capitalists believe their own deficit "hyperventilation" as Wray calls it. Certainly the Tea-baggers do. Wray's defined distinction between deficit "dove's" and "hawks" is a useful one.It's also the case that, since Reagan, the Right has been systematically carrying out a campaign to reduce tax rates to the point where mounting decifits would force reductions in public operation of the "safety net." Reagan's budget director David Stockman admitted straight up that that was their agenda. What we are seeing at the moment is the first time that strategy has looked like it might succeed. It's success, of course, is dependent on widespread consumption of the deficit hysteria Kool-Aid, which everyone, Obama included, seems prepared at last to do.The only sane voices with any sizeable megaphones are the Keynesian "doves," like Krugman. Wray's Post-Keynesian MMT "owls," remain painfully marginalized in the debate, as he described in a recent post.

    • That ‘painful marginalisation,’ Phaedrus, clearly, is a function of a lack of media democracy. Although bandwidth, airwaves, frequencies in the ether belong to the people, to the commons, they have been monopolised by the usual suspects and corporations. Even John Lennon’s peaceful “Imagine,” along with provocative music, such as Rage Against the Machine, was banned by those oligopolistic/monopolistic broadcast corporations in the wake of 9/11. So, of course, ideas or perspectives, which threaten the profits of those in power, will be marginalised.

      But it seems crucial, beyond understanding operational realities of our monetary systems and economies, we also address the political barriers to entry erected around us and between us. Even if the whole of the United States understands modern money for public purpose, it is most probable, they will then turn to their corporate-sponsored political party A or B, which will betray them every time. Dr. Black’s articles on Obama’s Great Betrayal are a great example. But not just Democrats are betrayed every time. But working-class Republicans are betrayed every time, too.

      So, let’s say we do achieve the goal of demonstrating the logic of how our modern money system works, what are Americans to do with that information? They have no representation, as Democrats and Republicans consistently work against the interests of the working-class in a collusive good-cop/bad-cop routine, as they push legislation to increase barriers to entry to political alternatives. Presidential debates are corporate-sponsored theatrics, as Ralph Nader has long held:

      “Well, of course,” Ralph Nader candidly admitted, ”two-party dictatorship, completely rigged, right down to the Presidential Debate Commission, which is a fancy phrase for a private corporation created in 1987 by the Republican and Democratic parties to get rid of the League of Women Voters, which supervised Presidential Debates up to then, and to exclude anyone who they think should not reach tens of millions of Americans.”

      I’m not saying we must be partisan, I’m just saying we must include, in our economic analysis (as economics is a social science) an honest component, which realistically deals with the question of democracy or lack thereof. Otherwise, how else are we to have the policies we desire enacted in government, unless we have real people’s opposition parties up on the stage, too, debating the two corporate parties?

  4. Anonymous,Losing the AAA rating wouldn't really pose a problem for the US. Remember that in 2001/2002, Moody's downgraded Japan to a rating below that of Botswana and Estonia, and yet Japan's long-term interest rate remained at/below 3%, the deficit and debt increased, and Japan has never missed a payment. -S. Kelton

  5. Stephanie's comment can be also be understood to imply that the AAA rating is itself (presently, at least) nothing but a "flat earth" ideological construct–a proposition readily supported by looking back to the AAA ratings uncritically accorded to the subprime mortgage bundles that helped precipitate the current state of affairs.

  6. you mean expectations theory didn't work when Japan's rating was dropped!?!?! sacrilege. How dare you!!! LOLThe US government has no need to sell T-bills at all. It's a stupid outdated law. Wasn't the purpose to have another way to raise capital in lieu of printing money back during the gold standard days? Or are you referring to the law that says the Treasury cannot sell to the Fed directly? That is a law right? I do think it's nice to have government notes and bonds as a way for people to save though. Plus for the bond market itself of course. I say if you want less than a year or two go get a CD or something.

  7. When Obama or his JP Morgan Chase mouthpiece (Daley) say they want to "do big things", they mean "make big cuts in SS and Medicare to placate the Peterson types." It's what they meant all along. The hopey changey thing was an all-out sham, and people should just turn off their television sets and become local activists. Until there is a mass movement, Wall Street will own both parties and all of Washington D.C. National politics will continue to consist of kabuki theater for the media and other elites. It's going to get a lot harder before it gets any easier. Buckle up.

  8. I think our Sputnik moment was the Chinese announcement that they will develop and deploy a new nuclear power infrastructure based on Liquid Flouride Thorium Reactors. It's an incredible story, really. America invented this safe, sustainable version of nuclear energy back in the 1950s, and then just moth-balled it in favor of designs that produce weapons-grade Uranium and Plutonium for the Pentagon.Back on topic, the economic argument is the same either way. Whether it's wind, solar or nuclear (or all three), we need a complete carbon-free national energy system. But we won't build one because Big Oil owns our government and 'mainstream' economics has everyone convinced that we're broke.We could save human civilization… But, jeez, we just happen to be tapped out right now. The sooner this imperium collapses in on us, the sooner we can start digging out and re-building.

  9. The whole of Keynes writings has to be modified in light of modern discoveries:Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth by Wynne Godley and Marc Lavoie is a new explanation of how our economic system needs to be understood. from page 2 of the book:Rejecting as chimerical the concept of the neo-classical production function,post-Keynesians hold that, in an uncertain world, firms, operating underconditions of imperfect competition and increasing returns, must decide how much to produce and how many workers to employ, what prices to charge, how much to invest, and how to obtain finance. It will be the pricing decision which, in general, determines the distribution of the national income between wages and profits. And as production and investment take time while expectations are in general falsified, there is a systemic need for loans from outside the production sector which generates acceptable credit money endogenously in other words (in accordance with common observation)there must exist a banking sector. According to post-Keynesian ideas, there is no natural tendency for economies to generate full employment, and for this and other reasons growth and stability require the active participation of governments in the form of fiscal, monetary and incomes policy.

  10. The household budget analogy with sovereign government budgets has everyone confused and fooled. Try explaining it to anyone which is "informed"/"educated"through the mass media.

  11. Interesting article, but I'm not sure spending "Maybe a trillion or so" on a high-speed rail system is the best use of public funds. Sure it may put a few people to work in the short run, but in the long run I would argue it would be a money pit….What's wrong with investing in industry that will be one day self sustainable? I'm afraid with the culture and behavior of the US it would take $15 gas to convince people to ride a train…at least in the Midwest …from The Economist June 30, 2011…"SOME years back a Greek finance minister, fed up with his country’s waste and extravagance, claimed that he could save money by shutting down the national railway and driving its passengers around in taxis. He was accused of hyperbole but seems, rather, to have been guilty of understatement. In 2009 the Greek railway collected just €174m ($250m) in fares and other revenues. Meanwhile, it spent €246m on wages and lost a total of €937m."

  12. @Anonymous July 21 2011 10:22amYou point is well taken. Perhaps there are better uses of resources than building a national, high-speed rail system. That is a political choice and its merits should be established through thoughtful debate. However, I insist that when we think about the "sustainability" of a public works program, we are not doing so in terms of the money of account. Public assets are always affordable in financial terms, however, they may not pass muster when held against real metrics. To evaluate the sustainability of a program we need to think in terms of efficiency: can the railway serves as an efficient means of overland, rapid transportation? If so, what are the real costs associated with its maintenance, administration, etc.?The Greek example presented also helps to make my point. Since the Greek finance minister has evaluated the railway system in purely financial terms he has failed to see that it is physically impossible for a national fleet of taxis to perform the same task as the railroads more efficiently. It is an engineering problem, not a financial one.And yet, the consistent policy failures that flow from a misunderstanding of money's role in a modern economy lead finance ministers the world over towards such foolish decisions.~Mitch Green