Contributed by Joe Montero
Joe Biden’s big stimulus package for the United States is extensive and contains within it Many good initiatives. More than 3000 kilometres of roads, the remaking of bridges, ports, and water systems. And there is a big boost in investment in research to eliminate carbon emissions.
Of special importance is the boost in spending on childcare, education, and healthcare.
Put together, the package totals to $US1.9 trillion in new government expenditure. It is extensive enough to bring a comparison with Roosevelt’s New Deal, response to the great depression.
Photo from VGC: Working class families will be helped by the stimulus spending
Labels aside, this is big enough to have a significant stimulus effect on the American economy, and it may have repercussions around the world. This is, of course, on the assumption that the economy only needs stimulus, and that the hard line republicans will not act as spoilers.
Perhaps the most important thing to note, is that the usually conservative president would not move this way without the weight of opinion calling for it. This is the driving force.
Having said this, although sufficient stimulus must be part of any response to the state of the economy that is going to work positively, far more is needed.
The first purpose of stimulus is to put money into the hands of those who do not have enough. This is achieved through either or a combination of affordable service provision and direct payments. The second one is to reduce the cost of doing business by having the state absorb part of it.
Who is going to pay for it though? As the saying goes. There is no free lunch. It’s either someone pays for it quickly, or the economy is saddled with an even bigger debt burden than already exists.
If it is the average wage earner and those depending on the social welfare system, It’s a case of giving with one hand and taking it with another. This is a pretence at stimulus.
There must be an overhaul of the taxation system. Taxes must be increased at the top end and lowered at the other. Other changes could be the imposition of a wealth tax on the superrich, a tax on dividends over a certain percentage, to encourage a more productive use for investment money. Lifting of wages and welfare system payments alongside this is important.
Joe Biden and his team are talking about tentative moves on this front. First up the package will be largely paid for through government borrowing. In the longer-term, this will still have to be paid for. The plan is to increase company tax to 28 percent over the next 15 years, combined with measure to close tax loopholes and tax havens.
But this is not enough to make a real difference.
Doing this involves a complete break from neoliberalism, which is, the idea that sound economic management is looking after the top end, a means to cause the trickle-down effect.
Turning this on its head can provide the conditions to take on changing the structure of the economy. It is fashionable to blame the state of the economy on Covid-19. This certainly didn’t help. But the problem has been around for considerably longer, and its cause lies in the structure of the economy.
The core problem is that it primarily operates in the interests of a few and not according to the needs of society. In everyday terms, this means dependence on worsening conditions for the majority as the vehicle for profit, and the contradiction in the corporate word that what benefits one does not always benefit the interests of corporations collectively.
Cutting purchasing power for most shrinks the market. Even more telling, the capacity to turn output into profit is undermined by its devaluation. This happens because of a shift in the proportions of the capitals used. Profit becomes increasingly dependent on lowering the cost of labour.
The problem lies in that the individual enterprise only considers its position rather than that of the economic wellbeing of society, becomes parasitic, and undermines the conditions on which it depends.
This is the reason why busines and politics have become so rife with corruption. The more monopolised the economy is, the more extensive the corruption.
To correct this, there must be measures to strengthen the social economy in relation to negative private interests, reduce parasitic behaviour, and counter the dominance of monopolies.
Achieving this change would meet the resistance of the target. There are clear implications for the United States. The same applies to other nations experiencing a similar problem.