Tuesday, 10 February 2009

The Economic Crisis Opportunity – The Short Term Response

With the global environmental crisis comes a global economic opportunity. Just as the response to climate change involves solutions that we should be undertaking anyway, so does the global economic crisis. In the long term we have to change our way of living to save the global environment and the global economy.

In the long term we have to move from an unlimited growth economy to a limits to growth economy. In the short term we have to preserve the livelihoods of working people while preparing for long term changes. That means we need short term economic stimulus and job creation.

Short term governmental budget deficits are going to be a necessary part of this response. We must bear in mind that budget deficits shift payments to future generations so they should be utilized in a manner that benefits future generations.

First of all they must not be used to transfer money from future generations to the present generation via tax cuts. The use of tax cuts at this time to stimulate the economy is a flawed approach anyway as people are more likely to save during times of economic uncertainty, rather than spend, because it is the prudent thing to do. The only people who will spend the tax cut funds are those that do not need them. Using deficit funding for tax cuts is simply stealing from our children and grandchildren.

The most important thing we can spend stimulus money on is dealing with the infrastructure deficit. If your roof was leaking and you had to borrow money to fix it – would you do that or leave it to deteriorate till the repairs could not be avoided and the costs had multiplied many times over what borrowing to fix it would cost you. That is what we have done with our infrastructure, except future generations will be saddled with those inflated costs. In our short-sighted concern about avoiding budget deficits we have let our country's infrastructure go into a deficit. Using deficit financing to eliminate the infrastructure deficit will save, not cost, future generations money.

As well, damaged transportation infrastructure increases transportation costs, as poor infrastructure leads to more necessary repairs on private vehicles, as well as public transit vehicles, and greater fuel consumption with it's environmental costs. Decaying water and sewer systems have health and environmental implications. Inadequate educational infrastructure affects the quality of our children's education and our society's readiness for the future.

The other component of economic stimulus that should provided by deficit spending is preparing for the new future. We should not be spending any government funds, and in particular funds that future generations will be paying for, on the old failed economy.

No funds should go to fossil fuels or nuclear energy. Funding of the energy sector should be targeted at renewable and environmentally friendly energy sources,

Industrial funding should be targeted at low energy and environmentally friendly infrastructure and sustainable industries. Funding for the automobile sector should be target to next generation environmentally friendly vehicles and public transit infrastructure.

We must prepare our economy, and the public, for the transition to a limits to growth economy and for the need to share the planets limited resources more equitably between those who now live in abject poverty and those who live in wasteful abundance driven by greed. This will be an economy with the emphasis on self-sufficiency and environmental sustainability, an economy based on a sense of community, locally and globally.

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