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It’s All Social Policy

Thomas Carlyle called economics the “dismal science” and the name stuck. But it’s not dismal science. It’s dismal history.

It’s impossible to concoct economic experiments the way a physicist composes experiments. All the economist can do is look at what’s happening—or, more frequently, what’s happened—in the real world. The deep scientific name for this study is econometrics. The result is a Niagara of statistics.

That’s why the financial pages in a newspaper resemble the sports pages. The sports and financial pages are filled with indisputable facts (the fund managers, the team managers) and statistical records (strikeouts, defaults, touchdowns, bankruptcies).

People clever with numbers sometimes make prediction as to what’s going to happen in sports or finance. And if you’re the innocent sort who believes what the deep-voiced sports forecaster predicts, you should not go near the stock market but keep your money under your mattress.

Now that we’ve come clean on the limits of economics as a science, let’s turn to economic policy. The idea that economic policy is just economics in action is equivalent to saying that deciding to bomb Hiroshima is just putting nuclear physics to work.

President Barack Obama urged Congress to get to work on economic policy in a bipartisan way. He invited some senators and representatives for bipartisan cocktails and had others watch the bipartisan Super Bowl with him. All very friendly. Everyone knew what the economic statistics showed: the falloff in trade, upsurge in unemployment and mortgage defaults, the collapse of banks, the plunge in stock values, the drop in commodity markets, the implosion in derivative markets, the vanishing of credit. The numbers described an economic collapse. Furthermore, the numbers had been getting worse for more than a year and were now worsening faster.

After the football game, after the corn chips and beer, the lawmakers sobered up and got to work. The result was one of the most partisan knock-down drag-out displays in recent memory. Most people were surprised by the verbal slugfest. But nobody should be surprised.

Economic policy is social policy—memorize that—and social policy is all about constructing the kind of society you want to live in. In other ages, Democrats and Republicans might have had more agreement on what constituted the good society, but not today. Nowadays, many Republicans don’t even call the Democratic Party by its own name but insist on calling it the “Democrat” Party. The awkward and ungrammatical usage has no purpose beyond juvenile spite.

Michael Steele, the new chairman of the Republican Party, addressed the nation just as our senators were butting heads on the stimulus bill. According to Steele, Democrats were “trying to force a massive spending bill through Congress under the guise of economic relief.” Well, yes, any decent stimulus bill is going to spend massively.

The chairman then mischaracterized the Democratic bill a couple of times. Steele boasted, “Republicans have offered innovative ideas to help struggling families and small businesses.” By my count he offered a grand total of two ideas: “stop the taxation of unemployment benefits” and “lower taxes for all working American families.”

Economists believe that cutting taxes produces quicker but smaller benefits compared to stimulus spending. Here’s why benefits are smaller. Steele says families will “spend it, save it, or invest it.” But most families won’t invest in today’s stock market and saving their money won’t stimulate the economy. Spending will help, but if they buy foreign goods—and many, many goods are foreign—the final dollar goes to China or Sri Lanka, not the United States.

On the other hand, if you pay our workers to repair our bridges and build our schools, the money energizes this country and we end up with a safe bridge and a new school.

Cutting taxes for “all working American families” sounds egalitarian, but among other things, it means cutting taxes for the top percent of the population. The last time I looked, the top 20 percent of the people held over 84 percent of the nation’s wealth, leaving less than 16 percent for the bottom 80 percent of the population.

It may strike us unthinkable that a group of conservative Republicans would purposely weaken the stimulus plan in order to have it fail. On the other hand, the last Republican president was willing and eager to lead the nation into an optional war that had catastrophic consequences. Nothing is really unthinkable.

—Gene Mirabelli


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