by Jonathan Young

Created on: February 10, 2009

Fixing the global economic crisis will involve a series of stimulus programs combined with the elimination of bad debts from insolvent banks. There will also be further actions intended to salvage real estate markets, although how this will work is debatable, because commercial and residential real estate are not even close to bottoming out.

The U.S. will have to start producing (along with consuming) and saving (along with spending), but in the short-term, the only solution is more consuming and spending, to produce a transition from hyper-consumerism to a better balance of consumption and production. Millions of jobs will have to be created, and quickly, but even this will not prevent years of economic turmoil. Because the political and cultural foundations of this problem go back decades, and because this recession's earliest indicators began appearing in 2001, much of what the government does now is going to look like a case of too little, too late.

Economists who understand the real challenges of the recession are calling the first stimulus package insufficient to make a real dent in the problem. Obama's approach, similar to Clinton's, of negotiating with Republicans who insist that corporate welfare is the same as fiscal conservatism, is said to be ineffective. The problem is that the Murdoch-Limbaugh media model likes controversy. In taking a more aggressive stance, Obama may not convince Republicans of much, but he will provide controversy. A more moderate tone at least creates an opportunity for bringing a straightforward message directly to voters, although as the crisis worsens, Obama's tone will match the seriousness of the issue for people who are losing their homes and jobs.

Part of the problem is that the Republican approach to economics was never based on a particular vision. Conservatives cite small government and tax cuts while enlarging the government and creating record deficits. The basis of this cognitive dissonance is a false dichotomy: one can either succeed in business or practice business ethics. For whatever reasons, many people believe in this false dichotomy, using it to rationalize unethical business practices.

As a result of this false dichotomy, the GOP understanding of where an economy sits on the Laffer Curve is always distorted. There is no particular social or economic science behind Republican ideology: tax cuts are viewed to be pure, and government spending, aside from the military and corporate welfare, is viewed to be impure.

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