Spend more to build a better economy

With hundreds of thousands of people taking to the streets in some of the largest protests in recent US history it is interesting to note that it is not all about the union rights.

When economic crisis and recession hit America, the solutions from Washington were few and as many felt – ineffective.

However, the latest tend to tackle the crisis is government spending cuts. From cutting workers’ pensions to social security, home heating assistance programs – everything in-between; with the exception of defense spending.

But will the push to spend really pull America out of the economic mess?

Dean Baker, from the Center for Economic Policy and Research argued it is really hard to know for sure.

The reason why we are in this down turn is the lack of demand. The government has to fill its gap. It has to spend more. If we instead said, ‘oh no-no-no we have to cut the government as well’ – we are digging a deeper hole. It makes no sense, and that’s what seems to be the agenda for the day,” he said.

Spending is what drives economy, “explained Barker, and you do not have to be an economist to understand that. “The reason we are hurting is the lack of spending.”

It would be great he said, if the private sector could spend more. But it does not work that way.

Until people can climb out of their indebtedness the government has to pick up the tab. They may not like it, but that’s the world.”

Power and tight knit groups of money earners lead to the crisis, argued Becker.

It’s largely some powerful moneyed interest that wanted to have beaten back workers’ rights for decades.”

He compared the situation on the ground with the public workers sector, where majority of social benefits have been preserved.

Those were lost by the lot of private sector workers for the last three decades, the he explains, “because of deliberate efforts to weaken the power of workers in the private sector …

The Utah legislature recently passed a bill that would make golden and silver coins legal state tender. There have been similar moves in some other states as well, converting precious metals into money and even calls to print local currency.

I think it says a lot about our crazy economic views going around,” remarked Becker. “I think it’s close to crazy, and you know the fact is the vast majority of people in the world are very confident with dollars and they want to hold them.”

This optimistic view though smashes against the painful economic reality in America, where a gap between the rich and the poor is rapidly growing.

Baker said he believed this trend could potentially be changed – but by the politics, not economics.

He agreed that hundreds of thousands of protesters across the country are important because they exemplify the massive inequality gap.

Protests, he said might help change the situation, but “there is a long way to go.”

Partly, Baker argued new policy toward the dollar could revive the private sector.

We shouldn’t want the dollar to fall, because if we want to increase the manufacturing sector the best thing we can do is get the dollar down to 20 to 30 percent against the other currencies,” he added.

All in all, spending more can better revive the economy than cuts, Baker argued.