Evolution to a New Paradigm

It's time for a revolution. No, make that an evolution--an evolution to a new world order, a new paradigm. It's not the end of history; it could turn out to be the beginning, or at least a turning point. In any case, it seems to me it's time to stop thinking in isms. As J. Fagg Foster used to say, it will be better when all isms are wasms. (Pronunciation: say "was" and then add "ms" like at the end of "isms." But never mind; the important thing is not the pronunciation but the idea.)

That is to say, we should not be using capitalism, or socialism, or communism, or any other ism, as a criterion of judgment. Of course we can use them as useful patterns for organization, but not as our one and only model as we have tended to do in the past. Instead we should be planning a new model, not one patterned after a particular institutional structure but one guided by a judgment of how an economy should organize itself the better to serve people. And not just a national economy, but a global economy, divided up as much as desirable into political subdivisions. And one with the Internet as a tool, maybe the greatest thing that's come along in centuries.

Then what should be the guideposts if not isms? We don't know the answer to that question, but we do have a pretty good sense of changes needed, of the kinds of problems that need to be solved. We know we should be doing better about poverty. That's a huge, and obvious, problem. We need to organize our economy, or economies, to produce enough goods and services for everyone, and most of all, to distribute them to everyone. We actually have the technology to do that. The huge inequities in income at the present time, I submit, are the major reason we're in something like a recession, or a slump in the economy. And of course we know about other things we need to do, or to provide, such as education, health care, war and peace--we could go on. In other words, we need to provide for human welfare. It's that simple. As Elizabeth Kubler-Ross said, what could be simpler, and yet what could be more difficult.

But to go on, it might be apparent that one thing we need to get us going right is an Adam Smith, or a Karl Marx, or an Alfred Marshall, or a John Maynard Keynes, or a Milton Friedman. As far as I can tell, we don't have that.

So where should I go with this? Yeah, right now I'll go political. We need to choose the candidate for the presidency of the United States who can take us into a new paradigm. Hillary Clinton, Barack Obama, or John McCain. I'll leave it at that for today.

Democrats and Republicans Fix the Economy

Time to compare how Democrats and Republicans fix the economy? Let's do it. Let's start by comparing the Bill Clinton and George W. Bush economic performances.

When Bill Clinton took office as President in 1993, the GDP was at $7,451 billion (at the end of 1992). By the end of 1993 GDP had reached $7,952 b, and it continued to advance every year of his presidency, reaching $9,888 b by the end of 2000, which was an increase of $2,437 b, the longest advance of GDP in American history. During George W. Bush's presidency, the first year, in 2001, the GDP fell initially to $9,876 b, which can be assumed to be a result of Clinton's policies, but by the end of 2001 it had rebounded to $9,910 b, after which it advanced continuously to $11,676 b at the end of 2007, the latest figure available. This represents an increase of $1,788 b during the seven years of his presidency. Were we to compare this figure with that of Clinton at the end of seven years, we find an increase of $2,221 b for Clinton. That is: the gain under Clinton for seven years was $2,221 b; under Bush, $1,788 b. Now, to continue to the present date of April 3, 2008, the economy is reported to be heading towar a recession. About that, we'll have to wait and see. In any case, the economic growth under Bush has been the slowest of any postwar expansion, averaging just 2.8 percent a year, far below the 4.8 percent average posted by earlier postwar business cycles of similar length.

Now to look at the rate of unemployment. Following the same timetable as above, unemployment during the first seven years of Clinton's presidency dropped from 6.9 percent in 1993 to 4.0 percent in 2000, a drop of 2.9 percentage points. During the first seven years of Bush's presidency, unemployment rose from 4.7 percent in 2001 to 5.3 percent in 2008, an increase of 0.6 percentage points.

What about those budget deficits Democrats are so often accused of? Clinton's presidency ended with a surplus of $5.6 trillion. Bush spent all of that and had accumulated a deficit of $8.5 trillion by July, 2006. It continues to grow.

How did they do this? There are two major tools available: monetary policy and fiscal policy. As for monetary policy, both parties generally favor lowering the rate of interest to stimulate the economy and both have had occasion to do this during their tenure. Although this can be done only by the Federal Reserve, the Fed has during these two presidencies been quite cooperative, lowering rates when indicated.

This leaves fiscal policy, the other major tool. The Democratic philosophy is to pursue a progressive tax structure and to use government spending as a stimulus as needed. Clinton as soon as he assumed the presidency raised taxes on the top brackets from 35 percent to 39 percent and lowered taxes on the lowest brackets by increasing the Earned Income Tax Credit. These actions bore fruit with eight years of increasing GDP, as noted above, and even a budget in surplus (the last budget surplus prior to Clinton's had been achieved by Lyndon Johnson in 1969.) The Republicans, on the other hand, tend to favor lowering taxes on the rich to stimulate the economy through increased investment. This policy has been pursued by Bush, with the results noted above--less growth and more unemployment than under Clinton, plus something we haven't yet noted here, huge budget deficits. The $3 trillion budget proposed by Bush for Fiscal Year 2009 has a proposed deficit of $400 billion, along with cuts in Medicare and Medicaid, health and human services, and education--cuts that will fall more heavily on lower income recipients. The Bush budget deficits, I would suggest, have been a major factor in keeping the economy going during most of the Bush presidency, although now, even with huge deficits, we appear to be going toward recession.

One extraneous point, if I may: I would fault Clinton for not using some of his surplus for needed social programs and/or such useful national projects as improving Amtrak.