Political Economics

There are many views about how to move the US out of our current economic recession. At their interesting Presidential Nominating Convention, held in Tampa last week,  the GOP restated its confidence in the natural business cycle - a nineteenth century idea which suggested that the normal economic cycle of boom and bust could be best controlled by reducing taxes which would allow more money to be spent in production and industry, thus increasing the money in circulation and causing business to flourish and more jobs to be created. A noble thought - and one which had some credence during the era of growth and development of manufacturing. Unfortunately, the US no longer leads the world in basic manufacturing. Our leadership is in advanced technology and finance - neither of which has very heavy short term employment fluctuation.  As a result of this change in our economy, there is more emphasis placed on the growth of small business - which mostly provides for direct consumer needs and is very sensitive to economic fluctuation. this part of the economy FOLLOWS the business cycle and is very difficult to stimulate directly; tax increase and decrease has little or no direct effect. If you want to stimulate small business, you have to somehow provide more of a demand for their services and products. If these small businesses are booming, they hire more employees - because they need them - because there is increased demand for their services and products. How do you increase the need for small business needs and products?  By direct input of money into the system so that more people can afford the products. How do you do that? By targeted government action - investing in the infrastructure; both physical (roads and bridges, etc) and cultural (teachers, police, firefighters, etc) with moderate increased taxation; or sadly, by developing a wartime economy - with very high taxes (in the name of necessity for survival) Of course this can be accomplished without increased taxation -just borrow the money (Sound familiar?) That's what the last several Republican administrations have done - now they want us to let them do it again, promising us that somehow the increasing deficit and debt will go away if they just lower taxes for everybody.