So does anyone think this will happen—even if a really rich guy thinks it's a really good idea?
In the Age of Austerity? Are you kidding.
Icahn Joins Business Leaders Begging Congress: Start Spendingby Dave Johnson | April 30, 2016
Billionaire investor (he’s always described that way) Carl Ichan is calling on Congress to start spending. You read that right: Ichan is saying there is a “day or reckoning” coming if the federal government doesn’t spend more to stimulate the economy.
CNBC has the story, in “Icahn: Markets will have ‘a day of reckoning’“:
Billionaire investor Carl Icahn is “extremely cautious” on the U.S. market, he told CNBC’s “Power Lunch” on Thursday.
“I do believe in general that there will be a day of reckoning unless we get fiscal stimulus,” he said, pointing to the Federal Reserve’s maintaining low interest rates, and potentially creating “tremendous bubbles.”
On the fiscal side Icahn argued that “you certainly could do more spending.”
“The Republican party that I used to be more sympathetic with — I’m right in the middle now, although as you know I’m for (GOP front-runner Donald) Trump — but what I would say is Congress is in this massive gridlock obsessed,” he said, explaining that the Republican-controlled Congress is “obsessed with this deficit to a point that I think it’s almost pathological.”
To be fair, Ichan is only saying what many in the business community have been saying for some time: spend – especially on infrastructure.
The U.S. Chamber of Commerce, hardly a liberal tax-and-spend organization, has been asking Congress to invest in infrastructure repair and modernization. This is from their website: “The Chamber believes that allowing our nation’s infrastructure to continue to deteriorate is not an option. It will cost jobs, stunt economic growth, reduce safety, and put us further behind our global competitors.”
Other business leaders feel the same way. The Washington Post on Friday, for example, noted in a story headlined “Big business fears campaign-trail criticisms putting policy priorities at risk” their frustration: “Their [business leaders] agenda is effectively stalled in Washington, where immigration reform and infrastructure spending are dead issues for now…”
The Fiscal Times, launched by conservative investment banking billionaire Peter G. Peterson, describes itself as “offering comprehensive quality reporting on vital fiscal policy, economic and consumer issues.” In February they laid out the problem, in “As Roads Crumble, Infrastructure Spending Hits a 30-Year Low“:
A big part of the problem is that federal investment in infrastructure has dropped by half during the past three decades, from 1 percent to 0.5 percent of GDP, leaving more of the responsibility and finances to state and local governments.
[. . .] But instead of making the infrastructure investments essential to building a stronger economic recovery, the report [by the Center on Budget and Policy Priorities] says, many states have opted instead for cutting taxes and offering corporations tax subsidies in a “misguided approach to boosting economic growth.”
“Tax cuts will spur little to no economic growth and take money away from schools, universities, and other public investments essential to producing the talented workforce that businesses need,” the report contends.
Economies Are Not Spending
The core problem with economies around the world is lack of demand. Governments have been cutting back in an austerity fever, literally taking money out of their economies. Public investment has fallen almost everywhere. There is no “stimulus” to be found, people are hurting, wages stagnant or falling. The result is a “savings glut,” where those with a lot of money are looking for places to invest, but with the world caught in austerity, no investment looks good because no one has any money to spend.
Interest rates are hitting zero, even in some countries falling below zero into “negative interest rates.” This means governments are charging money to be a safe holding place for funds. This low-interest-rate situation, with all of this money floating around looking for places to invest is, as Ichan put it, potentially creating “tremendous bubbles.”
Governments can “borrow” – allow people to park their money in the safe havens of government bonds — for a zero interest rate, and even get paid to hold the money. They could use that money to revitalize infrastructure which would hire people, put suppliers to work, get money moving. This is “stimulus” which gets the rest of an economy moving again. This zero interest rate situation is money markets begging governments to do this, even paying them with negative interest rates to please put this money to good use.
But governments refuse to do their job, caught in, as Ichan describes it, pathological obsession with deficits. Ideologically convinced that government spending is bad, they refuse, even as the money markets beg them to use their money for public investment.
Then “Pay For” By Collecting Taxes Owed
If governments won’t “pay for” investment in infrastructure by taking the money that investors are begging them, even paying them, to take when they issue bonds, maybe there is another way to “pay for” it: Collect taxes. They don’t even necessarily have to raise tax rates to accomplish that. Presidential candidate Bernie Sanders, for example, is offering a $1 trillion infrastructure investment plan, paid for by asking corporations to pay the taxes they already owe on profits they have parked outside the country in order to take advantage of a loophole called “deferral.” Doing this actually raises enough money to invest $1 trillion in infrastructure by 2020. (And then the modernized infrastructure makes our economy more efficient and robust.)
Other countries around the world could learn from this. They could satisfy their obsession with “deficits” by outlawing tax-haven banking and corporate secrecy. By making billionaires and corporations pay the taxes they owe, they could bring in billions – even trillions – of tax revenue to attack budget deficits and the worldwide slack in demand.
Business Community Must Decide
It’s time for the businesses community to decide how long they will continue backing anti-government conservatives and their poisonous ideology of destruction.
The anti-government conservative movement was and is about destroying government itself. The business community went along for the ride (and paid for it) because the strategy of using tax cuts to defund government handed them a windfall. But now the conservative project has reached the point of actual destruction of government.
The infrastructure is crumbling, the judicial branch is non-functional, the public is rising up, the parties are collapsing, the economy is stagnant and, as Ichan warns, “there will be a day of reckoning.” more