The World In Protest, Revolution or Civil War, Part Fourteen

This was first published in May 2012.


"The Battle Over Budgets" Part One/Overview

While technically the "Great Recession" ended a couple of years ago, the effects of the crisis continue to linger. In America, new home sales remain at low levels, thus keeping the home building industry, and its associated businesses, slow. Hiring has been relatively steady, but not robust, bringing down the unemployment rate at what seems an agonizingly slow pace, although it must be noted that government employment cuts at all levels have negated part of the gains in the private sector. Further, we can't forget that just as the economy turned the corner from severe downturn to the upside, the Gulf oil spill brought new economic problems, as well as a literal mess to the states along the coast there. Then Japan was rattled by a major earthquake, shaking not only that country, but bringing the economic jitters to many, especially the then recovering American auto industry. We have to remember folks, like it, not like it, nations, including America, are no longer just dependent upon their own economies and resources, they are all entangled to varying degrees of, well, "entanglement." If a major nation, or group of nations, sneezes, other nations catch cold too.

Further, the attempts to rein in the "casino-like" atmosphere of the banking industry has not been very successful, although higher reserve requirements mean banks have had to take money from other parts of their business to meet these requirements. Bankers undoubtedly argue that this reduces the number of loans they can make, thus limiting economic expansion, and there's certainly truth to that, but we can't have things both ways folks. This is what happens when we let things get out of hand, which is what happened. The banks went wild, the collapse came, and now we're trying to get the cat back into the bag, but it is a painful process. Attempts to regulate the banks more directly has essentially failed, as banks, along with largely, but not exclusively, Republican allies, fought tooth and nail to keep regulation as lax as possible. They succeeded, but common sense failed. The result has been a very recent new revelation that super bank J.P. Morgan Chase has suffered an admitted two billion dollar loss, which might actually be four billion (do I hear five? Six?), from risky investments.*

One of the effects of the "Great Recession" has been on government budgets. As I noted above, in the U.S., at the federal, state and local levels (including schools), contractions in revenue,** and rising costs for certain things, have brought great budget squeezes. Federal stimulus money helped some communities keep layoffs to a minimum, especially of police and fire personnel, but the money was really a one time, short term shot in the arm. Once it was gone, major decisions had to be made to keep budgets in balance, and many a worker lost their job. Meanwhile, similar has been happening elsewhere in the world, in particular in Europe.

* Okay, anti-regulation people argue that you can't have freedom if you have regulation. "Freedom," however, is in the eye of the beholder. In the 2000s, the banks went wild and laid their very solvency on the line in all sorts of risky investments, much of it based on an overheating mortgage business. The resulting collapse in 2008 brought America and the world to an economic crisis not seen since the Great Depression. Quick action by many nations, including the U.S., even initially by the "free market" Bush administration, contained the damage, although the aftereffects are still with us. Banks are not just playing with their own money, they are playing with YOUR money, and with the nation's (and the world's) economic security. If you boarded a commercial airliner and the captain decided to start all sorts of risky maneuvers, I seriously doubt  you would say, "Oh that's okay, it's a free country, you can't tell the captain or the airlines how to fly their planes. Keep government regulation out of my air travel." Be careful in this election year when you hear politicians telling you they want to cut or eliminate regulation. You might just get on an airplane with a crazy captain.

** There has been a "double whammy," if you will, in that lower employment and business activity have naturally curtailed tax revenue, but also tax cuts, enacted at the national level and also at many state levels to promote growth, have taken a bite out of income. Less spending has meant less revenue from sales taxes. The dramatic decline in home prices has meant less money from property taxes.  

WORD HISTORY:
Budget-This word goes back to Indo European "bhelgh," which had the notion of "swell, inflate, bulge." This spawned a number of forms in Indo European's offspring, including Celtic, which had "bulgos/bolgos," meaning "stomach, bag," and this gave Gaulish "bulga(s)," with the same meanings. This then was borrowed into Latin as "bulga," which meant "leather bag, pouch." A leather pouch was used to hold money. Old French, a Latin-based language, inherited the word as "bouge" (initially "boulge") also with the meaning "leather pouch/bag, often used for money." This later became "bougette," which meant "small pouch/bag." English borrowed the word from French initially as "bouget" in the early 1400s, and the word expanded in meaning beyond the actual pouch/bag, but also to its content. By the 1700s government finance people kept their financial plans in such a "pouch/bag," thus modern "budget." The verb form developed from the noun in the 1800s.