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China successfully built a high speed rail network while the U.S. flailed in a very weak and slow recovery held back by near record low government spending.
Chinese Maglev train, Shanghai
High speed magnetic levitation train, Shanghai, China

When the great global recession hit, the Chinese government went full speed ahead on plans to develop high speed rail. China embarked on a massive debt-funded spending program to develop public infrastructure. Now, just 5 years later, China is reaping the benefits of increased productivity. The Republican mantra for over 30 years, cut government spending, has led to American stagnation while China has prospered by investing in public infrastructure.

Just five years after China's high-speed rail system opened, it is carrying nearly twice as many passengers each month as the country's domestic airline industry. With traffic growing 28 per cent a year for the last several years, China's high-speed rail network will handle more passengers by early next year than the 54 million people a month who board domestic flights in the United States. ...

Business executives like Zhen Qinan, a founder of the stock market in coastal Shenzhen, ride bullet trains to meetings all over China to avoid airport delays. The trains hurtle along at 186 miles an hour and are smooth, well-lighted, comfortable and almost invariably punctual, if not early. "I did not think it would change so quickly. High-speed trains seemed like a strange thing, but now it's just part of our lives," Zhen said. ...

Chinese workers are now more productive. A paper for the World Bank by three consultants this year found that Chinese cities connected to the high-speed rail network, as more than 100 are already, are likely to experience broad growth in worker productivity. The productivity gains occur when companies find themselves within a couple of hours' train ride of tens of millions of potential customers, employees and rivals.

President Obama and the Democrats passed a modest brief stimulus program that boosted spending enough to prevent a full-blown depression in America, but the stimulus has worn off and U.S. public investment is dropping towards all time lows as a percentage of GDP. Republicans have bitterly fought high speed rail and other stimulus investments pushed by President Obama. And, frankly, that's why China is kicking out asses. Privatization is making America uncompetitive.
Meanwhile in Washington, behind the Kabuki in the Capitol, Democrats are moving towards locking in the sequester austerity budget that slashes federal investment necessary to rebuild and improve American infrastructure, research and development.
The House-passed continuing resolution funds the government through Dec. 15 at a spending level of $986.3 billion, roughly what the government is currently spending after the sequester. Senate Democrats plan to strip out the bill's language that prohibits funding for Obamacare, but senior aides privately concede that they'll reluctantly accept the sequester level and won't risk a shutdown for higher spending. The White House has steered clear of using its primary leverage -- a veto threat -- to unwind the sequester.

The Budget Control Act calls for a fiscal 2014 spending level of $1.058 trillion, before the sequester cuts that to $967 billion. The sequester would bring down the spending level to $967 billion either way. Senior Democratic aides insist this is temporary and the low spending levels won't be locked in. But voting to establish a lower top-line spending level in the short term cedes their leverage to ultimately scrap sequestration cuts.

America is surrendering its world economic leadership to China by failing to make public investments. Austerity is killing jobs and growth while crushing the prospects of our young adults. Austerity is the economic equivalent of bleeding a sick patient. We're slashing spending in fear of illusory government debt. Republicans are afraid of investing in the future and they are wrecking America to protect the wealth of a tiny ultra-wealthy elite that might be hurt by change. And, Democrats are enabling them to do so.
These spending cuts have not been kind to the U.S. economy. The contraction in federal government consumption and investment has caused a direct drag on economic growth in eight of the past 10 quarters, including the past three quarters consecutively. Although down from its peak several years ago, the unemployment rate remains greater than the level most forecasters had predicted three years ago, when Congress began cutting federal spending. And for many American families, the recession is not over. Indeed, median household income today is lower than it was when the Great Recession technically came to a close in June 2009.

It is in this economic context that conservatives in Congress are demanding even more cutbacks. The Congressional Budget Office has reported that implementing the sequester cuts in 2014 will reduce real gross domestic product, or GDP, by 0.7 percent and reduce employment by 900,000 jobs. Since Speaker Boehner’s approach would cement most of these cuts into place, the immediate negative economic consequences alone should be enough for Congress to reject it.

Adding to the absurdity of considering further cuts is the simple fact that the allegedly worrisome federal fiscal situation—the stated rationale for these cuts—is not nearly as worrisome today as it once was. Measured as a share of GDP, this year’s federal budget deficit is expected to come in at its lowest level since 2008. More importantly, the projections of future budgets have improved dramatically over the past three years. The federal debt-to-GDP ratio was once expected to rise to unprecedented levels by the end of the decade; it is now expected to decline for the next five years and only then rising slowly, to end in 2023 at the same level it is today.

The median male worker is doing worse today than he was before 1980 when America adopted Reagan's conservative economic ideology. Conservatism has enriched the rich, stolen from the commons and deprived America of the public investments needed to compete successfully with China, Germany and other world economies.
If too much government spending is America's problem, then why is China kicking our collective asses? Austerity has been a catastrophe in southern Europe. Why are we embracing it?

Originally posted to FishOutofWater on Tue Sep 24, 2013 at 08:01 PM PDT.

Also republished by In Support of Labor and Unions and Climate Change SOS.

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