How to Turn a Recovery into Another Recession

by Victor Davis Hanson

If one wished to ensure that the recession that officially began in December 2007 and officially ended in June/July 2009 would not be followed by a robust recovery but an anemic one characterized by a 1938-like stasis of high unemployment, weak growth, and massive deficits, I would do the following — both to confuse and antagonize the job-hiring classes: 

a) Ensure uncertainty in the private sector so that it continues to cut back and hoard cash. That climate of doubt might be best accomplished by serial talk of higher taxes and new entitlement costs born by the employer such as a federal take-over of health care.

b) Take both real and iconic measures that scare business and question the old rules of free enterprise, perhaps by trying to shut down a new Boeing aircraft plant or reversing the order of the Chrysler creditors or absorbing a private company or two.

c) Create a psychological climate hostile to business that either scares employers or angers them into sitting out any perceived recovery; the best way to do that would be demagogic talk about a country split between those noble who make below $200,000 in annual income and those culpable over $200,000 who need to pay higher taxes; or to use redistributive language suggesting one should at some point realize that he has made enough money, or has thousands in unneeded income that should be taxed, or one should spread the wealth, or need ‘redistributive change’; personalize further those making over $200,000 by pejorative terms such as “fat-cat,” “millionaires and billionaires,” and “corporate jet owners.”

d) Send a message that subsidized companies, especially in so-called green industry, are noble and need help, while profit-making corporations, especially in energy, are suspect. The trick would be to put new regulations on fossil-fuel energy generation plants, prohibit energy and gas exploration and production in large areas of the country, and always prefer subsidizing new energy rather than allowing companies to produce traditional sources on their own.

e) Be selective in targeting capitalist enemies of the people. The conservative Koch brothers and Rupert Murdoch are grasping and greedy; the speculators George Soros and Warren Buffett or the very richest Americans like Bill Gates, or non-income-tax paying companies like GE are public-minded and humane. Again, the point is to send the message that for corporations and the wealthy, exemption from White House criticism is found in voiced partisanship and that such preference might well extend to enacting new government crony-capitalist regulations and taxation.

f) Run up historical deficits in ‘gorge the beast’ style that will force at some point either massive new taxes or a Greece-like crack-up, or a steady erosion in the value of U.S. currency, ensuring the U.S. is no longer seen as a haven for investment and financial safety.

The strangest thing about the current paradox of cash-flush companies and little or no economic growth is the administration’s puzzlement over the lethargy — as if no one outside Washington ever listened to what the administration has said or noticed what they have done the last three years.

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