Sunday, 8 May 2016

Why modern-day Conservatism is so wrong

As a former policy analyst, I've always been leery of the old conservative trope that likens "public" finances with "private" finances:

1) functioning states are, for all intents and purposes, immortal; human beings aren't

2) "lower taxes all around (for us rich folks, that is)" is deadly to the notion of good government, and especially deadly to the this abstract little thing called "confidence".

The 18+ trillion dollars of the US public debt depends on the two points above.

An in extremis argument for (or, it is 'against'?) Conservatism is Donald Trump. Besides being all that Ed Massa, an editor for Huffington Post, says he is:

Editor’s note: Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S. (http://www.huffingtonpost.com/entry/donald-trump-abortion_us_572aa2bbe4b096e9f0905153?utm_hp_ref=donald-trump)

the more important point is that all neo-conservatives, from Harper's Cabinet to the Tea Party movement in the US all exhibit, to varying degrees, the Trump traits (remember well the snitch line that the Canadian conservatives put up in the last general elections so "conscientious" Canadians could report "barbaric cultural practices" - to whom? begs the question).

For Harper, it was always "don't load the national debt on our grandchildren" even as he racked up the largest debt in Canadian history on the one hand and lowered taxes (boutiques for the rich really) like a drunken conservative. In what universe does that math make any sense?

In no universe because one cannot insist on less revenues while hoping to pay down a pre-existing debt, especially a national debt of a first world country. It'd be like asking for a demotion to a corporate mailroom while insisting on an unsustainable lifestyle of the president of a multi-national company. There really never was a plan for the future let alone a long-term investment plan to retool the population for the ever-evolving Canadian economy (temporary foreign workers! was the Harper conservatives' real plan).

Now comes the Donald utterly emboldened by years of outrageous stunts of the Tea Party (http://www.huffingtonpost.ca/2016/05/07/donald-trump-debt-crisis_n_9862558.html).

In talking about defaulting and renegotiating the US national debt, the Donald, in characteristic neo-con, showed no worries attitude of magical thinking: "and if the economy was good, it was good. So therefore, you can't lose."

I would highly suspect that Trump was (and probably still is) completely unaware of the real linkages between "too big to fail" and the viability of US economy - these people wear their ignorance proudly. Confidence-in-the-economy seems to be something utterly rarified almost non-existent thing to him:

2008 would look like a walk in the park
Right now, the U.S. borrows money at some of the lowest interest rates in the world, because that debt — U.S. Treasury bonds -- is considered one of the safest investments in the world, maybe the safest there is.

But if Trump defaulted on that debt, or even just tried to renegotiate, its status as world's safest debt would disappear overnight. Suddenly, creditors around the world would demand much higher interest rates on U.S. bonds.

That would immediately increase the amount of interest the U.S. would have to pay on the money it borrows. The large but currently manageable debt would suddenly become entirely unmanageable. The U.S. would careen towards a government debt crisis.

At the same time, the value of that debt would collapse on the markets. And since Treasury bonds are part of investment portfolios around the world, everyone would get hit — from governments on every continent to your retirement pension plan to banks and individual investors.

And as Matt Yglesias points out at Vox, if the world's safest investment is no longer so safe, then all the other investments suddenly become riskier too. All the rest of the world's governments would suddenly also face higher interest rates. Heavily indebted countries that are already paying high interest (Greece, Italy and Spain come to mind) would risk all-out collapse.

Simply put, Trump's debt plan would send the entire world into a crisis, and it would probably be much worse than the one in 2008. That crisis was caused by a much smaller class of debt — U.S. mortgages, securitized and sold off to investors. If American mortgage debt going bad could tank the whole world's economy, imagine what U.S. Treasuries going bad could do.(http://www.huffingtonpost.ca/2016/05/07/donald-trump-debt-crisis_n_9862558.html)

I like pointing out that Harper is a "first world 1%-er that don't care if the other 99% live in third world conditions". That type of mentality has always invariably led to the so-called: failed states, and seemingly intractable social unrest.

Jay

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