Op-Ed: Hey Congress – Rome is still burning

Just when you thought the fire brigade was going get on with its job, the bean counting process has come back. This time it’s the stimulus package which is about to receive a few more straws of ancient wisdom from earmarks and niche nitpicking.

The New York Times

But the broad support he has enjoyed so far for the basic concept is now being tested as the specifics become clearer. While conservatives criticize the high spending, and moderate Democrats express concern about the swelling deficit, liberals are pushing for even more money devoted to social programs, alternative-energy development and road, bridge and school construction.

Nice to know people can still afford principles. The theories are OK, the timing is lousy. The economy was put on life support three months ago. One in ten Americans is on food stamps. Millions of people have lost their homes. The Jobs Apocalypse is still destroying the savings as well as the incomes of millions more. The problem with the ideological positions is that the liberal/conservative dichotomy isn’t even relevant under these circumstances. The fire is burning, destroying capital at a fantastic rate. It doesn’t matter which side of the fence you’re on when the whole city is going up in smoke. Put simply- Private capital has been more than decimated. It's been totally destroyed. A large part of the US domestic economy has been literally wiped out. Banks and lenders are now living on what are basically handouts from the Fed at the sort of rates you’d give loans to friends who you thought were a bit dumb. Credit is an endangered species, and commercial finance is very hard to get. The good news is that the big monster issues, investment and jobs, are getting some positive results and some comprehension. Senator Kent Conrad, (D, North Dakota) and Budget Committee chairman hit the right nail on the head:

“Investment, investment, investment has got to be the central focus: energy, roads, bridges, waterways, housing,” he said. “Job creation is Job One.”

What’s now involved, bluntly, is Economy Creation. The old economy is effectively dead and gone. All the investment and job creation has to work as the germ of what will really be a new American economy. The antiquated infrastructure, still tottering along 50 years after it was built, needs to be rebuilt, anyway. The investment will have to be new investment, because so much investment capital was destroyed in the market meltdowns. The new jobs will have to drive a modernized domestic economy. This new economy will not be able to recreate the heirloom museum of absurd, top heavy, debt-riddled business models which fell over like bowling pins when the credit crunch hit. The economic business model which created this mess can’t be rebuilt, for which we should be truly thankful. It won’t be a return to the past, because the past is broke. At the same time, the ongoing fires which are engulfing savings, homes, and what’s left of people’s money have to be put out with working income bases and hard cash. For economists, there’s some history being made here. This is the first time since the Depression that a whole economy has had to be rebuilt. But this time the rebuilding involves a Hiroshima-like rebuilding. All that’s really left are some of the shells, and it’s not a matter of just replacing the structures. It's replacing the culture, too. After the Depression, a lot of businesses went under, but the economy was still recognizable. This time, even the corporate structures are gone, melted in the heat from the burning capital. The old capitalist ideologies and methods went up in smoke, too, and they have to be replaced with working models. By all means, let’s have principles. Let’s just make sure they’re practical principles, because the supply of liquidity to put out the fires, most of which are still raging, is still very limited.