The debate over the Federal stimulus has gone down the rabbit hole of political hysterics. Lost in the “socialism” melodrama are some big questions with some potentially scary answers.<\/p>\n
First, let me say that I’m convinced that we needed a huge, debt-driven infusion of cash late in 2008 to keep the economy going and to prevent states like California and New York from tipping into insolvency.<\/p>\n
There’s a lot of hand-wring over 10% unemployment, but without the stimulus we might easily be pushing into the 15-17% range.<\/p>\n
What’s more, I think the bank and car-maker bailouts helped prevent a Depression-scale economic catastrophe.<\/p>\n
But all the good news (or, rather, happily mediocre news) doesn’t settle the two looming quandaries that still remain.<\/p>\n
1. Will America mire itself in so much public debt that we’ll drown any future prosperity?<\/p>\n
2. Is government simulus spending masking the fact that our economy is fundamentally broken?<\/p>\n
On the first point, I think — Paul Krugman aside — a growing number of economists think we’re approaching a dangerous horizon.<\/p>\n
There is a very real potential, especially if interest rates spiral upward, that the U.S. could find itself in a Third-World style debt crunch.<\/p>\n
But I think this worry is secondary to the core problem of a broken economy. And here’s where the North Country comes in.<\/p>\n
When most economists talk about stimulus spending, the underlying assumption is that the national economy is relatively sound and healthy.<\/p>\n
All that’s needed is a little pump-priming, perhaps a few regulatory tweaks, and we’re ready to cycle upward back to full production and employment<\/p>\n
That is, arguably, what happened after the Great Depression.<\/p>\n
The New Deal and the deficit spending that fueled the Second World War primed the national pump on a massive scale.<\/p>\n
But there’s a wrinkle. The stimulus of the 1930s and 40s only worked for parts of the country where the underlying economy was healthy.<\/p>\n
In much of rural America, it simply didn’t work. <\/p>\n
A half-century later, many small towns are still mired in depression-level poverty — masked in some cases by government spending.<\/p>\n
The North Country, where we live, is a case in point.<\/p>\n
This region has benefited from half a century of massive government infusions of cash, most of it provided by taxpayers living elsewhere.<\/p>\n
But despite an endless cycles of stimulus spending, we still rely on government spending for nearly half of our take-home salaries.<\/p>\n
In our dependancy-economy, government remains the region’s single largest provider of investment capital.<\/p>\n
So why didn’t the pump-priming work here?<\/p>\n
Put bluntly, it’s because our private sector doesn’t create products and services that enough consumers want to buy.<\/p>\n
On the contrary. <\/p>\n
More and more of our factories and mills have shut down, because the same products can be made cheaper elsewhere, or because demand for those products no longer exists.<\/p>\n
My fear is that America writ large is beginning to look like the North Country.<\/p>\n
Once the stimulus money is gone, will there be enough factories and labs and farms and mills producing enough goods and services to keep the economy rolling forward?<\/p>\n
Or will we find whole states — California? Michigan? — stuck with the kind of chronic double-digit unemployment and lackluster private investment that have long afflicted rural America?<\/p>\n","protected":false},"excerpt":{"rendered":"
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