The United States needs another stimulus package to increase domestic economic activity which will generate more jobs and eliminate the remnants of the “Great Recession”. However, the Congress hesitates to pass the necessary legislation because the members are spooked by the rise of a competing worry, the federal deficit, now at $12.3 trillion and increasing by over $1 trillion for this year and the next.
These are not unimportant numbers but they should be placed in context: the accumulated deficit is equal to the lost revenues of the George W. Bush tax cuts plus the cost of the George W. Bush wars in Iraq and Afghanistan. Without these very questionable expenditures there would be no federal deficit.
The proposed jobs bill is not questionable. It is required by the very high unemployment rate now almost 10% according to federal statistics but actually nearer to 15% when it includes the workers who have stopped looking for work, the workers who are forced to work part-time, and those working at jobs well below their training. As a result, we have a serious jobs crisis, a family crisis, and a humanitarian crisis that requires immediate amelioration before it leads to a social explosion.
The US economy and the federal government have other obligations, current and potential, that make the federal deficit look like small change. The Wall Street Journal reported on June 16, 2010, in an inside section indicating minimum importance, that, “Right now, US banks, mostly a few giants, have $276 trillion in over-the-counter derivatives….. Most of these derivatives are within commercial bank subsidiaries that enjoy federal deposit insurance. Thus, the banks effectively enjoy a government subsidy that likely distorts prices and allows them to hold too little capital against the derivatives…. The top derivative banks are so big the government would almost certainly rescue them - and their derivatives affiliates - if they are collapsed….”
The frightening $276 trillion threat posed by the derivatives is not getting the attention of the media and the Congress commensurate with the danger, nowhere near the worry about the $12 trillion threat and that's a pity. The $12 trillion threat is being used to prevent passage of a $1 trillion jobs bill that would boost jobs and business activity as it did during the Great Depression of the 1930s.
These contrasting choices highlight the most important issues this election year. There is no obligation for the federal government to guarantee any derivative investments (aka gambling). There is an obligation for the federal government to promote social and family stability through gainful employment policies.
Will the candidates for the U.S. Senate and the House of Representatives respond to the political contributions of the bankers or the agonies of the workers and their families? Stay tuned.