Wednesday, April 08, 2009
First, I advocated for the federalization of the unemployment insurance programs run by the states, with a much higher wage replacement rate of 60%, capped at $50,000 in benefits per year. Stimulus funds directed in such a manner would arrest the decline in consumption, reduce the number of foreclosures and preserve the jobs of people still employed. Current wage replacement rates are far too low to achieve these outcomes, based as they are on the belief that reasonable replacement rates discourage people from seeking work. Indeed, the rate of job loss is accelerating and , while the attempt to reduce foreclosures through loan modifications has been shockingly unsuccessful.
Second, it is time for the government to take action and utilize its regulatory control over the financial sector, a control utilized to date in the service of bailing out the institutions that created the housing bubble, to induce them to implement Mr. Mortgage's recommendation that upside down borrowers be granted principal reductions. He correctly observes that only in this way can the economy be resuscitated. As someone who exalts individual decisionmaking through the markets, he would probably consider this inappropriate governmental coercion, but, as a leftist, I am much more sanguine about it.
Why am I revisiting the subject after the stimulus plan has already been passed? Well, as recent unemployment and foreclosure data indicate, there is good reason to believe that the bailout and the stimulus plan have failed, intensifying the risk that of an even more intense and socially disruptive collapse of the global economy. Just because they got it wrong the first time, and continue to get it wrong, doesn't mean that we should stop promoting better alternatives. Furthermore, if we give it some thought, there are other proposals worthy of consideration as well.
Ponder, for a moment, the demand killing consequences of the costs of a college education and the need to service student loans upon graduation. It is hard to buy much, or just make end's meet, when you are paying back student loans that can easily exceed over $100,000. Or, even worse, as is now being reported, the inability of people to attend college at all because they can't afford it. Why not just direct a lot of stimulus money towards grants for people to attend school, rather than dole out tax cuts? Didn't the government implement a program like that for veterans after World War II? Why not direct funds into the educational system itself, so that they can avoid reducing the number of applicants admitted?
Ponder also the emerging trend of people refusing to go to the doctor to receive periodic tests and preventive care:
Surely, we could direct stimulus monies toward paying for such care?
Kimberly Ragucci, a graphic designer, has a high-deductible health plan that pays for expenses only after she has spent $5,000 in a year.
The 23-year-old mother, who lives in Long Beach, doesn't have dental or vision insurance. She takes her son for regular pediatric care, but barring a medical emergency, she said she didn't plan to seek healthcare for herself any time soon.
"I have astigmatism, and I need a new prescription," she said. "I haven't been to the eye doctor for more than two years. And ever since I got pregnant, my teeth have moved a lot. I know I need to see a dentist, but I can't afford it."
I know, I know, we should have a single payer health care system, and such spending, as with the educational grant program, may have a marginal direct economic impact. But do they? As noted elsewhere in the article, dentists in Southern California are experiencing a 15% to 30% decline in business. Reduced enrollment by universities result in pressure upon employees to accept less pay and benefits, if not layoffs. As the cultural left recognized long ago, the provision of medical care and educational instruction are forms of production as well, as much a part of the capitalist processes of the expropriation of surplus value and primitive accumulation as the more commonly historically recognized forms of manufacture.