Obama drops a sham budget the same day China officially overtakes Japan as the World’s second largest economy. The latter is pre-baked old news. That China will surpass the U.S. in a mere 10 years? Some might wonder why the delay?
Obama tactically is wise to play budget kabuki with Republicans now. They’re disorganized, fumbling votes. Tactical politics dictate only open with the first card. Make the Republicans get their act together before trying to make a deal. Shows he’s learned a little bit from the stimulus fiasco. Still, a small a game with small players. Neither offers a way out for America’s long term economic problems. The first step must be to wean the American addict off its bubble addiction.
Consider: Deng Xiaoping accelerated China’s economic reforms in and around 1980. The same time as America abandoned traditional capitalism for plutocratic crony casino gambling. The game started with the then new fax machine and spreadsheet technology. Together, Wall Street didn’t need to be Wall Street anymore. And a 28 year old could gin up arguments for ‘unlocking’ wealth by tearing down. Hence, the 1980s M&A/LBO bubble. We were friends with one of the real life players fictionally portrayed in Stone’s ‘Wall Street’. Stone was not that far off. When we got there some people really did spread out lines at 2:30 AM to make it through another 24 hours churning out mounds of mind numbing, mostly unread paper for a closing. This first bubble popped the same time as its sisters, the S&L boondoggle and the first real estate run up.
By the early to mid 1990s, the American economy started its long migration to the Pearl River Complex. Consulting companies like the current Accenture held huge conferences teaching how to out source to China. The structural damage all carefully camouflaged. Post Netscape IPO and tout le monde reached for the NASDAQ ring. Boom, fraud, the usual routine. ENRON, Ebbers at WorldCom, etc. We had a friend working with then-AT&T CEO Armstrong who was going crazy facing pressure to match WorldCom’s (faked) numbers.
They say Clinton’s America created 20 million new jobs. True. Many of them, however, based on illusions and sock puppets peddling dog food. We all know the dot com bubble popped. And the CLEC (competitive local exchange carrier) flame out. By 2001 America economically flat lined, albeit with a budget surplus.
Two bubbles quickly helped obscure the reality that the American economy no longer creates long term wealth and jobs. First came the fear/threat national security boom followed by the real estate/financial swindle. Net result? No net new jobs created. Underscore that — we are exactly back where we started. With one exception – unprecedented wealth concentration.
Obama may claim he’s creating new jobs. Or ‘making investments’. But the American economic structural atrophy is not and can not be tackled by a federal budget. Or Potemkin ‘retraining’ programs. We must first begin with hard truths. The American economy doesn’t create much real value. For us or for export. We need a comprehensive macro economic development vision to cure our bubble addiction. Executed across industry by industry, down each silo from component and subcomponents to final assembly, etc. With tax, tariff and budgets aligned accordingly. Not the reverse.
Obama’s budget is thus D.O.A. regardless of the Republican counter. Neither have a plan to stop the bubble addiction. Neither can afford to. It’d mean telling the American people they are indeed rodents in the spinning wheel, going nowhere.
Some Rightists share this concern. They argue America needs a return to ‘Hamiltonian’ policies. Helpful but insufficient. Quaint even. Hamilton’s ad hoc market interventions helped nurture burgeoning American comparative advantage. Japan, China, the Four Tigers – all gouged the heart out of the American ‘free trade’ tragedy of the commons. Corporate America was not only complicit but eager partners. Does anyone really think ‘Hamiltonian’ policies could have handled “>Japan’s original post-war wealth creation model copied by others? Or the current Chinese juggernaut? What’s precisely the American comparative advantage now?
A problem with junkies is they never admit they’ve a problem. So now comes another fake boom, the ‘social media’ economy. Overstated? Zynga is the company that makes games for Facebook. It’s now being valued at between $7-$9 billion. It was a mere $4 billion 10 months ago. Facebook is now valued higher than Amazon and tails only Google on the Web. Don’t forget Twitter. It’s a company that doesn’t have a real business model or a path to sustainable revenue. It’s average revenue per user (ARPU) is 28 cents. Now said to be ‘worth’ $8-$10 billion. Most likely as a part of Google, etc.
There’ll be economic spin offs from this newest bubble. There always is. Cheerful cable talking heads touting some index going up. The question few will ask is what’s any different from the other bubbles? Valuations suggest it’s the same old song. How long will the associated economic activity last? Where does the final ‘wealth’ end up? Or just the chimera of hope and change? You know where the Stiftung stands.
All of which is to say the looming budget fracas is relatively uninteresting. Cutting the deficit or ‘investing’ in education or even on random projects like high speed rail are beside the point. Without a comprehensive macro economic vision and actual politics to implement it, the budget ‘battle’ is like the old WWF. Which reduces 2012 down to Republican Light vs. Republican Right.