FREE MONEY?
BY JULIANNE MALVEAUX
If you think that interest rates are the price of money, then when the
Federal Reserve Board decided to drop the interest rate to 2 percent, its
lowest rate since 1961, they pretty much said that money was free. The only
way you could get it cheaper was to try to get a loan on a mid-price car.
General Motors, Chrysler, Ford, and Mitsubishi, among others, will finance a
car over three years without collecting a dime of interest.
Will his drastic step kick start a stagnant economy? Probably not. But
the Fed is finding fewer and fewer arrows in its quiver. If they keep it up,
the United States will run the same course of action as Japan, with interest
rates at officially zero, which mean that we’ll almost be willing to pay
folks to borrow money. That’s no way to run an economy, but absent effective
fiscal policy, it’s the only method we have.
Congress keeps debating an economic stimulus package, but with most of
the money in the package slated for corporate relief, the possibility of
trickle down is low and falling. Even though the Senate says they won’t help
corporations unless they help the unemployed, there are far more corporate
lobbyists than advocates for the poor. And while a few advocates, like Nydia
Velasquez (D-NY) and John Kerry (D-Mass.) would stomp for small business,
most would target relief at our nation’s largest businesses. WE are prepared
to offer free money, but mostly to those who don’t need it.
The concept of free money is intriguing in these times. If the federal
government is to offer a helping hand, perhaps they ought to offer it to
those whose spending would pump money into the economy. We’ve already set
aside some $55 billion for post-terrorism relief, but it has been targeted
toward corporations, not toward the low-income unemployed worker, or the
emerging small business. Even though small businesses generate more than half
of our nation’s new jobs, they don’t employ half of our nation’s lobbyists,
and that perhaps explains why they are so very ignored as the federal governm
ent extends a helping hand. Indeed, some would say that the hand that helps
would have been extended whether there was terrorism or not, and that some
cynical lawmakers have used terrorism as an excuse to reward their supporters
and contributors.
Too many corporations want a sure deal, but the Fed says that it cut
interest rates because of "heightened uncertainty" and "concerns about
deterioration in business conditions." For all the federal exhortations
about patriotic shopping, pushing plastic in the name of the red, white and
blue isn’t going to get it, especially when consumer confidence is down.
More and more Americans have eschewed a way of life that motivates them to
shop until they drop. Many, despite an expensive ad campaign, reject the
notion that eating out is the "American way of life". Instead they want to
stay at home and figure out what "normal" is, having been warned by our
leaders that attacks are imminent and the beat goes on.
The national focus has been on the big picture. Airlines are laying
people off, hotel occupancy rates are down, travel and tourism is taking a
hit, and unemployment is rising. There is a smaller, more poignant picture
that gets much less attention. Only a third of those who are unemployed
qualify for unemployment compensation. Too many of those who have lost jobs
were already earning a pittance and did not have the reserves to carry them
for a month or two of unemployment. Flight attendants and pilots may lose
work, but so will the low-wage workers who clean airport floors or wait
tables in restaurants now closed. One group of folks generates headlines,
while the others huddle on the sidelines, waiting for attention.
The focus on interest rates has the same effect of providing
opportunities for some while ignoring others. Lower interest rates makes
borrowing attractive for those with good credit, but some have no credit at
all. Lower interest rates will push some into the stock market, but others
will be hard pressed to visit a supermarket unless then can find enough money
to buy groceries. Free money is attractive to those who can qualify for it,
but even the soundest small businesses can’t get free money when banks have
used up their liquidity financing the dot com fiasco.
Freedom isn’t free, and the price of money, for most of us, is far more than
2 percent. The Federal Reserve Board has signaled its concern about our
stagnant economy, but their concern isn’t likely to trickle down when our
attention is riveted by big business, not the smaller entities that comprise
our economic backbone.