It should be abundantly clear by now that we cannot rely on government to do the right thing to steer the U.S. economy back to good health. We are living in a Friedmanite-Randian epoch and we must act accordingly (no matter how Machiavellian that might seem). What we need is a private-sector solution to the high unemployment problem, one that uses the power of capitalism and free enterprise (and not whining about the government's inaction). As the tepid economic "recovery" fizzles to a stall and an ideological civil war rages in Washington, millions and millions of otherwise hard-working Americans wonder if they will ever be employed again. The U.S. economy remains stuck in neutral, incapable of creating enough new jobs to replace the more than eight million jobs that were vaporized during the Great Recession and to accommodate all the new entrants in the job market as the population grows. With the unemployment rate stuck semi-permanently at 9 percent and prospects grim for any major improvement in the near-term, the citizens of this great nation seem to be at the "mercy of the fates" with only passive "solutions" available.
The first economic remedy is simply to let the economy "heal itself" by waiting for people to start spending enough money to generate enough business activity to replace all the lost jobs. This "solution" will take a long time and might not work because the middle class does not have enough money to "spend" the economy back to full employment. Individuals lost approximately $13 trillion in the value of their housing and investments, with only $3 trillion of recovery in the stock market and no housing recovery to offset that enormous financial hit. Consumer spending is inhibited, too, by the massive amount of personal debt accumulated in the years leading up to the 2008 financial industry crash. Fear of losing one's job and an awareness of the necessity to build up savings to prepare for the next calamity also keeps money out of the economy. Another remedy requires the citizenry to wait for the federal government to solve the economic problems, specifically by increasing the annual federal deficit (beyond its current ultra-high levels) by providing more stimulus spending to create jobs (e.g., via a new Depression-era WPA to fix the nation's crumbling infrastructure) and/or by reducing or eliminating all taxes that impact middle class incomes. For better or worse, this "solution" won't happen in today's political climate with the current emphasis on deficit reduction (and general infighting between the Democrats and Republicans).
Clearly, we need a jobs solution NOW! I have devised a plan to restore the U.S. economy to full employment. It is a complex private-sector mechanism that involves giving another dose of financial nitroglycerin to Wall Street hoping that this time they won't nuke the economy. In exchange, we get lots and lots of jobs. A Faustian bargain? Perhaps, but what's the alternative? For the many millions of our fellow citizens who have been left behind by the flagging U.S. economy, survival now depends on the goodness of friends, family, and ever-shrinking public assistance. My plan is a free enterprise solution, a purely private sector jobs generator independent of government bickering, dithering, gridlock, "kicking the can down the road," etc. While appropriate government policy might alleviate the unemployment problem (and prevent the recklessness in the finance/banking industry that crashed the economy in 2008), the current political climate is such that waiting for the government to act becomes an almost absurdist predicament à la Samuel Beckett's Waiting for Godot. Instead of raging against the government, we should focus on implementing my plan (or some similar variant) to restore the wounded U.S. economy. This is a private sector problem that requires a private sector solution! Titled "A Modest Proposal to Save the American Economy: Entrepreneurial Blitzkrieg as Job Creation Vehicle," my plan is just such a solution.
The United States (allegedly) is a capitalist nation founded upon free market principles. Why not use the power of capitalism to solve the high unemployment problem? Why continue to sit on our hands fretting that the government is the "bad guy" and incapable of solving the problem? The "Modest Proposal," though complex (perhaps convoluted?), represents a private sector solution worthy of consideration. The proposal could be implemented today, without regard for the action or inaction of Congress, if American capitalists chose to implement it (or something very similar). Waiting for the government to tweak the tax policy or address the (phony) debt ceiling "crisis" seems completely counterproductive when we could reboot the flagging U.S. economy right now. I am challenging the American people to "take arms against a sea of troubles and by opposing end them" instead of passively waiting for the economy to heal itself or remaining transfixed by the endless feint-and-parry of the ongoing posturing between the Democrats and Republicans in Congress, each of whom battles for an agenda not necessarily in the best interest of the U.S. citizenry. I believe that it is essentially pointless to continue talking about what the government should be doing, while millions and millions of very real people suffer the consequences of what the economy is not doing.
With the "Modest Proposal" (and companion piece "75 Percent Solution"), I am presenting a mechanism through which we can fund a massive number of new business ventures by tapping the financial power of Wall Street to create jobs on Main Street. This approach ramps up employment quickly and puts money directly into the hands of the people who need it now: the consumers (whose spending represents 70 percent of GDP). This enormous financial turbo-boost to the economy reinvigorates economic activity and quickly returns the eight million jobs lost during the Great Recession. The purpose of this mechanism is to take a private sector proactive approach to address the expected long-term high unemployment problem.
We must be courageous enough to acknowledge that we live in a plutocracy where the wealthy control the means of governance. Regrettably, then, to restore the nation to full employment, we must find a way to incentivize the barons of Wall Street to invest in new businesses for the regular folks on Main Street. My private-sector free market plan achieves the goal of returning the U.S. economy to full employment. The plan provides a major (profit-generating) incentive to Wall Street to transfer massive amounts of investment funding to Main Street through the creation of a massive number of new entrepreneurial ventures. The plan effectively "piggy-backs" onto existing financial industry architecture to securitize the entrepreneurial investment process, thus enabling Wall Street to make boatloads of cash in the secondary market. The net result of the plan is the massive creation of new jobs to jump-start the U.S. economy back to full employment. The mortgage-backed security (MBS), which was the cornerstone of the 2008 crash, provides the perfect template for my free enterprise jobs solution. Simply replace the MBS with what I've designated as a venture-backed security (VBS) and, voilà, a tsunami of new business creation and lots and lots of new jobs (=incomes =increased consumer spending =booming economy) and the U.S. economy is turbo-charged back to full employment. Of course, the VBS (similar to the MBS) is yet another form of financial nitroglycerin, which does indeed raise the possibility of another Wall Street-fueled financial industry crash. However, we need jobs so the risk is worth taking.
The Entrepreneurial Blitzkrieg at the heart of the "Modest Proposal," fueled by the financial power of Wall Street via the creation of the venture-backed security, represents a credible solution to the high unemployment problem. Why wait for the government when we can create jobs today? We should be motivated to demonstrate that capitalism trumps government indecision by launching the entrepreneurial blitzkrieg to jump-start the U.S. economy and re-empower the millions and millions of Americans left behind by the calamity of the Great Recession!
High Unemployment, Federal Budget Deficit, & Wealth Concentration
The high annual federal deficit problem that we are experiencing, just one consequence of the Great Recession, can be explained in part via a view from the macro perspective. A healthy economy, where budget deficits are tiny or nonexistent, might be defined as one where consumers have enough aggregate spending power to purchase all the goods and services that are being produced in the economy. An unhealthy economy can be described as one where consumers do not have enough aggregate spending power to purchase all the goods and services that are being produced. In the latter case, the federal government must increase spending (=deficits) to make up the difference. It is clear that this represents the current economic situation here in America.
We must ask ourselves why the American people do not have enough spending capability to purchase the goods and services being produced in the economy. A likely culprit is the squeeze on middle class income that has taken place over the past 30 years, as more and more of the overall income pie has been siphoned off by the top 1 percent of income earners. In fact, 80 percent of the income growth in the U.S. economy over the past 30 years went to the top 1 percent of the income earning population and the rest of it went to the top 2 or 3 percent. Since 1980, the U.S. economy has doubled in size with all gains going to that same group of "super rich," leaving the middle class starved for income and incapable of "spending" its way out of the Great Recession. The result, unsurprisingly, is high unemployment and huge government budget deficits. In rough terms, if the growth in the U.S. economy had been spread equally throughout the economy instead of being siphoned off by the wealthy, each and every wage/salary earner in middle class America would now be earning double what he or she is currently earning! For example, a schoolteacher or police officer earning $45,000 today would have been earning $90,000 if the aggregate U.S. income increases had remained in the middle class. Consider the difference in the lives of the middle class if this were the case! This would represent a return to the days when one income could buy a house, support a family, and send children to college. People would be far less reliant on government handouts, which would enable the government to balance its books and not run continuous deficits. We would not be worried about social security or Medicare "running out," becoming insolvent, or bankrupting the federal government. When income is distributed properly throughout the economy a lot of problems simply do not exist!
Consider, too, that today the top 1 percent of the population earns nearly 25 percent of the total income produced in the United States. For comparison, back in the mid-1970s this group was earning less than 9 percent of the income pie. Today, the wealthiest 400 persons in this country have the same wealth as the bottom 50 percent of the population (approx 155 million Americans). These figures are comparable to 1929 before the economic collapse that led to the Great Depression. This wealth concentration reflects a trend of the past 30 years as we've made a shift towards the finance industry and stripped away many New Deal era regulations and government oversight. Taking "referees" off the playing field leads directly to abuse, recklessness, and grievous imbalances in income and wealth distribution. The ongoing 9 percent unemployment rate and tepid economic "recovery" are direct fallout from a middle class suffering from income asphyxiation.
One might surmise that it doesn't matter who earns the money because all the money is still in the economy. True. However, rich folks don't spend money like the rest of us. They save a much much higher percentage of their earnings than do their middle class brethren, in effect removing large sums of money from the economy. So, all the "extra" money that falls into the hands of the wealthy tends to stay there and is not reinvested in the economy to buy the goods and services produced by the economy. Without going into all the gory details (especially for those of you who remember your eyes glazing over in 8th or 9th grade algebra class), the net result of a populace not being able to purchase all the goods and services produced by the economy is deficit spending by the federal government or a recession or both. Without trying to start a class war, it is easy to see how this wealth concentration is related to the sluggish economy and high unemployment problems that we are facing today.
How did President Franklin Roosevelt ultimately end the Great Depression? By pouring scandalous amounts of government funds into the economy during World War II to defeat Hitler and stop the Japanese aggression. How much funding? Annual deficit spending equivalent to 25 percent of GDP! That would be more than four trillion dollars today! Could you imagine the federal government running up annual deficits of four trillion dollars? Congress would never allow such a thing! However, with the distortions in the income distribution that we have experienced over the past 30 years, current deficit spending of over one trillion dollars is nowhere near enough to drop the 9 percent unemployment down to a healthy 5 percent. While four trillion dollar deficit spending for a few years might break the back of lingering recessionary effects, which include high unemployment, such spending will never be authorized by Congress and the U.S. economy must heal itself without government help.
With the middle class so starved of income (liquidity) and the consequent constraints on consumer spending, the federal government by necessity must run enormous deficits to cover the shortfall in spending. What the government doesn't cover manifests as unemployment, which is exactly where we are today. What are our options? As noted, pushing deficit spending to astronomical levels (akin to those during WWII) would certainly soak up all the unemployed, eliminate the unemployment problem, and jump-start the flagging U.S. economy. In the context of the current political climate, increasing deficit spending is not going to happen. So, what's left? We could look to that great pool of money that the middle class "lost" to the wealthy classes during the past 30 years. Of course, we can't go to the homes of the wealthy with torches and pitchforks and demand that they give us that money. No, they earned it legitimately based on the rules and laws that govern our nation. What we need is a mechanism that will entice them to reinvest that money in the economy, especially via the creation of new business ventures to provide new jobs that we desperately need.
Entrepreneurial Blitzkrieg as Jobs Generator
I have proposed a free enterprise mechanism to resolve the entrenched high unemployment problem and jump-start the flagging U.S. economy. The Entrepreneurial Blitzkrieg is a proactive private-sector solution that enables the American people to use available tools to return the nation's economy to the status of full employment, a condition where everyone who wants a job can find one. The Entrepreneurial Blitzkrieg is a free market solution, which would move "unproductive" money directly and immediately into the U.S. economy to increase consumer spending to the level necessary to return the economy to full employment. The Entrepreneurial Blitzkrieg, by providing profit-based incentives to Wall Street, "recycles" money and circulates it through the economy via new business creation (=jobs) to rejuvenate consumer spending and reboot the American economy.