The broad outlines of economic policy are not really that complicated or hard to understand. Don't believe me? Well, just listen to Nobel Prize-winner Joseph Stiglitz as interviewed on Democracy Now! Wednesday, as he sheds light on a series of big topics that have been the subjects of far more heat than light. First, on the newly-hot-again topic of foreclosures:
AMY GOODMAN: Our guest is Joseph Stiglitz, Nobel Prize-winning economist, professor at Columbia University. His book is out in paperback, Freefall: America, Free Markets, and the Sinking of the World Economy.
So, just to summarize, you are for a national moratorium on foreclosures.
JOSEPH STIGLITZ: I think--inevitably, I think we have to be moving towards that. And the reason is very simple. There were such--the bad practices were so rife, the inequities were so rife, the fraudulent behavior was so common, that at this point we don't know what is a valid mortgage and not. And the consequences of throwing somebody out of their home, when they shouldn't be, are hard to reverse. I mean, just imagine what it does to the family--education of the kids are interrupted--what it does to the community. So, when we have to balance the injustices--and life is unfortunately always balancing one side versus the other--and where will their mistakes be easily reversed and where not? My view is, if we keep them in the homes for a little longer, they owe the money--they still owe the money, that doesn't let them off the hook--but what we're saying is we're not going to speed up this process of-where there's the serious risk of an inequity that will not be easily compensated for.
Who can argue with that when it's put so simply and directly? Answer: No one. Which is why there's so much invested in making sure that it's never put so simply and directly. That's sort of the pattern that's established throughout this interview.
Regarding the need for further stimulus, and why the deficit is a red herring just now, he's equally lucid and to-the-point:
AMY GOODMAN: Joe Stiglitz, the deficit, the battle cry of the Tea Party movement, of the Republicans, as well. Robert Rubin has weighed in, says any new stimulus plan is highly likely to be counterproductive. What do you think has to happen? Does the deficit matter? And how do you think it should be dealt with?
JOSEPH STIGLITZ:My view is we cannot afford not to stimulate the economy. So, you know, anybody that says we should go back to austerity or we should not have a second-round stimulus just doesn't understand economics. And let me be very clear about this. If we don't stimulate the economy, the economy is going to get weaker. When the economy gets weaker, tax revenues go down and expenditures go up. Already, more than 40 million Americans are on food stamps. Number of people on Medicaid is reaching record levels. So, revenues go down, expenditures go up, deficits get worse. If you stimulate the economy, then people get jobs, they spend money, tax revenues go up. Now, if we spend the money on investments-investments in education, technology, infrastructure-you grow the economy in the short run from the stimulus, you grow the economy in the long term because of the returns that you get on these investments.
I mean, just think about this from the point of view of a firm. If you are a firm and you could borrow at zero to two-and-a-half percent, which is what the government can borrow, and you have investment opportunities that you owe ten, 15, 20 percent, you would be irresponsible, you would be foolish, not to undertake those investments. So, anybody that says, "I'm going to only look at one side of the balance sheet, the liabilities; I'm not going to look at the other side, the assets," is really not understanding economics. It's that kind of reasoning that got our country in the trouble in the first place, the people who didn't-you know, shortsighted behavior of the banks that got our country in trouble in the first place. And to me, I just view those kinds of statements as totally irresponsible.
Get that? Look what he does in place of the standard, brain-dead, totally misleading analogy with household budget-balancing (which, taken literally, would mean that no one should ever hold a mortgage, right? Or a car loan?) He makes a genuinely appropriate and valid analogy with a business and its investment opportunities vs. costs. Another example that so lucid and on-point that the only way to counter it is to suppress it.
Dick Cheney was famous for his "One Percent Doctrine", described by Ron Suskind in his book of the same name:
If there's a 1% chance that Pakistani scientists are helping al-Qaeda build or develop a nuclear weapon, we have to treat it as a certainty in terms of our response. It's not about our analysis ... It's about our response.
And yet, curiously, that same attitude did not apply to the threat of global warming, which was known about as far back as the 1970s, and theorized in the late 1800s. While those outside the climate science community have been artfully confused by a denialist strategy, no one can credibly claim that experts regard the chance of global warming at less than 1%. Nor, indeed, has the chance been seen as that remote since at least the 1980s. So why no 1% doctrine there?
Setting aside the question of answers for the moment, the question itself is most illuminating. First of all, how come it has not been asked very often? Suskind's book was a NYT bestseller. The question--if not some variation--is a fairly obvious one. So why hasn't it been asked quite doggedly? Secondly, what does it mean to have risk formulated this way? How does it comport with professional risk analysis and risk management? How does it compare with traditional practices in the field of insurance? Or other fields where risks must be assessed and resonded to? Whatever the reasons involved in why this doctrine was formulated, just how different is it?
A rough answer to these questions is fairly straightforward: It's quite different. The normal way of calculating potential losses is to multiply the potential loss by the probabilty. A 1% probability of even a terrible loss is still enormously different from a 100% probability. What's more, treating it as a certainty would entail acting in a manner that ignores any costs involved in the potential over-reaction. We may not know what those costs might be. They could be quite high, or they could be relatively trvial. But if we do not even stop to consider them, then we are not even attempting to engage in a rational process. This can be especially disastrous if we actually increase the probabily of what we fear by assuming it to already be certain. There is also, of course, the chance that concentrating on one improbably threat may distract us from attended to other, more imminant and credible threats.
Thus, whatever the reasons for Cheney's approach embodied in the "one percent doctrine", it is perfectly clear that it is not a normal procedure for those accustomed to dealing with threats, it does not accurately assess the threat involved, nor does it consdier the existence of additional threats that it may actually enhance or even create where they do not presently exist.
With those problematic aspects of the "one percent doctrine" already established, we can now turn to the questions of "Why?" And here there is already a fairly rich literature.
"Do we expect advances in cell-biology to be immediately accessible to anyone with even a college degree?" he asks plaintively.
But here is where Athreya makes a serious misstep. The science of cell biology is by no means monolithic, but there is a pretty good consensus about what constitutes scientific truth for the bulk of the field....
The same is demonstrably not true for economics. Nobel Prize winners disagree on the most basic points, such as: what's the proper role of fiscal and monetary policy during a recession? Does the minimum wage or illegal immigration hurt or help employment? Economists disagree. What impact does regulation have on the economy? Economists disagree. Yes, economics is hard -- so hard that even economists with fancy degrees don't appear, to the layman, to know what the heck is going on.
This wouldn't be such a big deal if weren't for the nagging little problem that economic policy is something we expect governments to do. We don't expect Congress to cure cancer, but we do expect our leaders to do their best to avoid inciting Depressions and bank panics and devastating trade wars.
Athreya's circle the wagon's defense raises a valid point - economics is too important to leave to just anyone.
Especially economists.
Towards that end, and to further illuminate the discussion our Federal Reserve researcher began, I suggest the following questions be used for all economic PhD candidates as part of their qualifying exams: ....
• Nobel Laureate Joseph Stiglitz wrote: "The Chicago School [of economics] bears the blame for providing a seeming intellectual foundation for the idea that markets are self- adjusting and the best role for government is to do nothing." Discuss the intellectual errors of The Chicago School, from Milton Friedman forwards....
• Joan Robinson of Cambridge University: "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists." What did she mean by this? ....
• John Kenneth Galbraith: "We have 2 classes of forecasters: Those who don't know... and those who don't know they don't know." Please explain what Galbraith's statement means in the context of Wall Street economists....
• A Federal Reserve researcher recently wrote: "I still feel ill at ease with my grasp of many issues, and I am fairly confident that this is not just a question of limited intellect." How would you explain the Dunning-Kruger effect to this person? What does Dunning-Kruger mean in practical terms to the work of economists?
• Statistician George Box said, "Remember that all models are wrong; the practical question is how wrong do they have to be to not be useful." Discuss.
Why bring this up now? Isn't this bruhahaha receeding rapidly in the rearview mirror? Well, yes, but...
In the fall of 2008, decades of finance-first, bankers-know-best economic policies coalesced to create one of the worst economic crises in history, one that the banks themselves could not survive without staggering levels of government support.
Yet astonishingly, nearly two years after the crash, Wall Street is still setting the economic agenda in Washington. As Congress begins to examine broader economic policy, lawmakers are under heavy Wall Street pressure to reduce the federal budget deficit-even though that could mean deepening the jobs crisis without any substantive economic benefits.
Small-bore reforms
At the same time, the financial reform bill that Congress is on the verge of passing leaves quite a bit to be desired. As the editors of The Nation emphasize, that legislation includes several small-bore fixes to ease the damage caused by Wall Street excess, but almost nothing to actually curb the excesses themselves. The capital markets casinos will largely be left untouched. Congress still has time to improve the bill over the next month as the House and Senate iron out their differences, and many useful reforms remain in play.
Nevertheless, Wall Street's lobbyists have succeeded in taking the most important reforms off the table. We will not break up the biggest banks this year, nor will we tax reckless financial speculation. We aren't even banning economically essential banks from participating in risky securities businesses.
Et tu, Buffet?
As Annie Lowrey notes for The Washington Independent, the crisis has even discredited Warren Buffett, one the few financial superstars who previously had a reputation as a "straight-shooter" that invested in responsible enterprises.
Buffett was once a harsh critic of credit rating agencies, the firms who slapped top ratings on toxic mortgage-backed securities and derivatives. But Buffett himself is also a top shareholder in Moody's, one of the worst ratings agencies. The Financial Crisis Inquiry Commission had to compel Buffett's testimony at a recent hearing via subpoena after Buffett turned down multiple requests to appear. At the hearing itself, Buffett did everything he could to pass the buck from himself and Moody's to any other possible target.
Slashing the deficit
Wall Street's ugly influence on economic policy extends far beyond the realm of bank regulation itself. Right now, financial elites are pushing hard on a right-wing plan to slash the federal budget deficit, and even many moderate Democrats are coming out in support of reduced government spending.
This strategy is a tremendous political blunder, as Steve Benen emphasizes for The Washington Monthly. It's true that the deficit does not poll very well-but the deficit is only one side of the issue. Cutting the deficit means slashing federal support for jobs-we can help the economy or we can slash the deficit, but we cannot do both at the same time.
Nearly everyone believes that creating jobs should be a top priority for the government, but if politicians only ask questions about the deficit, they won't hear answers about the economy. The political imperative is clear, as Benen notes:
This really shouldn't be complicated: invest in more job creation, help struggling states as they keep laying off workers, and make clear to voters that the economy is more important than the deficit. Do this immediately, without apology.
Replacing Social Security with credit cards?
Wall Street loves cutting social services in the name of deficit reduction. Every public good that can be efficiently provided for by the government can also be inefficiently provided by the private sector-replacing public benefits with corporate profits. The bank lobby would like nothing more than to replace Social Security with credit cards for senior citizens. Wall Street doesn't make a dime on the government's Social Security payments-but they can make a killing on a privatized market.
Weak job growth=Weak private sector
Lest there be any question about whether or not the government needs to take strong action to strengthen the labor market, take a look at Friday's jobs report. As Tim Fernholz notes for The American Prospect, this report was the most disappointing piece of economic news in months. While the economy gained 431,000 new jobs during the month, 411,000 of them were temporary hires by the U.S. Census, meaning the private sector is not able to support much new hiring.
There's a critical lesson there: The only serious engine of job growth in the month of May was the federal government. Absent government hiring, the economy is not improving at all. There is an almost bottomless supply of critical social needs that require work right now, but no private-sector momentum to meet those needs.
The BP oil catastrophe should underscore how important new, green energy is to the U.S. economy-yet U.S. efforts to develop green energy solutions have fallen far behind those of China and other industrial powerhouse nations. Major federal investment into the research and implementation of green energy would be good for our environment and good for our economy.
Don't let social services suffer
But astoundingly, the advice on the world economy currently coming from top policymakers at the Federal Reserve, the International Monetary Fund and European central banks is echoing the bank lobby line: Slash social programs now, and let the job market fend for itself. As Dean Baker emphasizes for AlterNet, these are the exact same policymakers who missed the housing bubble, made the wrong calls on bank regulation and sent the global economy into freefall.
There has been little change in personnel and no acknowledgment of error at the central banks whose incompetence was responsible for the crisis . . . . their agenda seems to be the same everywhere, cut back retirement benefits, reduce public support for health care, weaken unions and make ordinary workers take pay cuts.
In short, Wall Street and the Wall Street policy agenda remain ascendant, despite economic catastrophe. In the Great Depression, the government actually learned its lesson-we regulated the banks, created Social Security and put millions to work through government hiring programs. That same basic agenda is needed today. Failing to meet it could well mean decades of economic decline.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Does Washington care about unemployment?
In 1983, Ronald Reagan's Washington regarded high unemployment as a national emergency. Today, with unemployment kissing 10 percent, Barack Obama's Washington scarcely seems perturbed. Why?
....Today, the unemployment rate is kissing 10 percent. Global financial markets are sending us a message that the excess demand for high-quality financial assets is growing again.
Yet, unlike 1983, there is no sense of urgency in Washington.
.... When the financial crisis first struck, most of the world's policy makers responded appropriately, cutting interest rates and allowing deficits to rise. And by doing the right thing, by applying the lessons learned from the 1930s, they managed to limit the damage: It was terrible, but it wasn't a second Great Depression.
Now, however, demands that governments switch from supporting their economies to punishing them have been proliferating in op-eds, speeches and reports from international organizations. Indeed, the idea that what depressed economies really need is even more suffering seems to be the new conventional wisdom, which John Kenneth Galbraith famously defined as "the ideas which are esteemed at any time for their acceptability."
The extent to which inflicting economic pain has become the accepted thing was driven home to me by the latest report on the economic outlook from the Organization for Economic Cooperation and Development, an influential Paris-based think tank supported by the governments of the world's advanced economies. The O.E.C.D. is a deeply cautious organization; what it says at any given time virtually defines that moment's conventional wisdom. And what the O.E.C.D. is saying right now is that policy makers should stop promoting economic recovery and instead begin raising interest rates and slashing spending.
G20 drops support for fiscal stimulus By Chris Giles and Christian Oliver in Busan
Published: June 5 2010 11:54 | Last updated: June 6 2010 17:25
Finance ministers of the world's leading economies have been so spooked by the sovereign debt crisis that they have decided they can no longer wait until economies are growing strongly before they remove fiscal stimulus.
The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, at the weekend also dropped proposals for a global banking levy, giving countries leeway to do what they thought best for their domestic circumstances.
The communiqué of the meeting made clear the G20 no longer thought expansionary fiscal policy was sustainable or effective in fostering recovery because investors were no longer confident about some countries' public finances.
Item: Spinning off from the a discussion of the later, Digby writes:
Rampant poverty can't be written off as the result of historical accident or a worker's incompetence. It is actively cultivated by bad public policies that direct economic resources into the hands of a wealthy few. The resulting inequality creates unnecessary suffering all over the world, from the humanitarian crisis in Haiti to the alarmingly high poverty rate in the United States.
Systemic poverty in Haiti
The tragedy in Haiti is not only the result of a massive earthquake. As Richard Kim explains for The Nation, Haiti has long been one of the world's poorest nations, and that poverty has prevented the country from protecting itself against natural disasters. As Kim explains:
Haiti's vulnerability to natural disasters, its food shortages, poverty, deforestation and lack of infrastructure, are not accidental. To say that it is the poorest nation in the Western hemisphere is to miss the point; Haiti was made poor-by France, the United States, Great Britain, other Western powers and by the IMF and the World Bank.
Kim details Haiti's struggles under the weight of colonialist debt that dates back to 1804, the year it won its independence from France. Soon after the revolution, the U.S. and France threatened a trade embargo against Haiti unless the nation of former slaves agreed to pay reparations to its former slave-masters in France. Haiti paid off this extortion with loans from U.S. and European banks. The country was still paying those loans back in the 1940s.
In 2003, Haitian President Jean-Bertrand Aristide demanded that France repay Haiti $21 billion of these unjust payments. He was ousted by a military coup for his efforts. Even today, the emergency IMF loans that are ostensibly helping Haiti cope with the disaster are crippled by insane stipulations, such as raising electricity prices for Haiti's poorest citizens.
One-eighth of U.S. population receiving food stamps
The U.S. has been waging a quiet war against its own poor for decades as well. In a blog for Working In These Times, Akito Yoshikane highlights today's record level of poverty: One in four U.S. children are living on food stamps, while one-eighth of the entire nation is receiving them. That's over 38 million people, or more than four times the population of New York City. A poverty epidemic on this scale is a total affront to any concept of economic justice, liberal or conservative.
MLK and economic justice
Just economic policy was a critical concern for Dr. Martin Luther King, Jr. But today's 13.2% U.S. poverty rate is actually higher than when King spoke out against it in 1968, as Rich Benjamin notes for AlterNet. The economic oppression of minorities continues to this day. While the overall U.S. unemployment rate is 10%, among black workers, the rate is an astonishing 16.2%, while Latino and Latina workers face 12.9% unemployment.
10% unemployment vs. multi-million dollar bonuses
It's impossible to tolerate 10% unemployment in any economy. But those high rates are especially cruel considering the multi-million-dollar bonuses being paid to bankers who were bailed out with U.S. citizens' tax dollars. Nomi Prins' fantastic interactive chart at Mother Jones reveals both the obscene executive pay levels and staggering federal bailouts that banks subsequently used to boost profits and banker pay.
Top bank executives scored regal paydays for nearly destroying the economy, and some of them even helped pervert the government into an enabler of banking excess. Need an example? Prins highlights Robert Rubin, who pushed through a host of radical deregulatory laws as Treasury Secretary in the 1990s, then left to take a job at Citigroup, where he reaped over $120 million before his company needed a massive bailout. There's no reason for policymakers to accept a 13.2% poverty rate while subsidizing paychecks for wealthy bankers.
What can be done?
The Financial Crisis Inquiry Commission, a panel convened to uncover the causes of the financial crisis, could play a key role in overturning the injustices embedded within the U.S. financial system. As Ruth Coniff notes for The Progressive, it's not simply that the bailouts saved the banks. It's that the banks are piggybacking on taxpayer-granted perks to score record profits.
Economic arguments are routinely deployed to excuse outrageous social injustices-the most common argument for the U.S. bank bailout claims that things would have been much worse for everyone if we hadn't thrown billions at the banks. There are grains of truth in the argument. If all of the banks had actually failed, the result would have been economic mayhem. But that bailout money should have come with major strings attached. There is no reason why bank CEOs, rather than taxpayers, should be reaping the rewards from profits that taxpayer funds generated.
In both global and domestic politics, severe inequality is often accepted as an economic fact, not a problem that must be solved. But the moral outrage prompted by the disaster in Haiti and the U.S. financial bailout is both real and justified. If we want to live in a just society, we cannot continue to subsidize the rich by exploiting the poor.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
Two key lawmakers on the House Financial Services Committee, Reps. Alan Grayson (D-FL) and Ron Paul (R-TX), are pushing to authorize a full, comprehensive audit of the Federal Reserve. The plan has sparked fury from both the Fed and the corporate banking industry, but the proposal is so appealing that the controversy is almost laughable.
The Federal Reserve is one of the most powerful economic institutions in the world, but most of its operations are conducted in total secrecy. The Fed's rescue activities have dwarfed the $700 billion Troubled Asset Relief Program, but without any public accounting. Some of these efforts may have been entirely appropriate, but we don't even know who the Fed is helping. That fact is a major barrier to establishing effective and fair economic policy.
"The Fed is a typical Washington institution that operates un-democratically and in virtually total secrecy, and a Congressionally-mandated audit that they (and much of the DC establishment) desperately oppose would be a serious step towards changing the dynamic of how things function. At the very least, it would provide an important template for defeating the interests which, in Washington, almost never lose."
Under the Grayson-Paul plan, which is offered as an amendment to the Financial Stability Improvement Act of 2009, the Government Accountability Office would be given the authority to audit all of the Federal Reserve's activities, just as it can audit other public programs and institutions.
Last week, the House Financial Services Committee approved the audit-the-fed bill, despite opposition from panel Chairman Barney Frank (D-MA), who tried to gut the plan. Even on the Financial Services Committee, where the banks concentrate their campaign contributions, Grayson was able to convince 14 other Democrats to stand up to the financial establishment.
The vote of approval scarcely registered on mainstream media's radar, and even then, the Grayson-Paul legislation was portrayed as an assault on the Fed's "political independence." As Dean Baker notes for Talking Points Memo, it's hard to see how a simple, public accounting can be construed as a political hit on the Fed's policy-making.
By setting interest rates, the Fed has enormous power to do almost anything under the economic sun, from fueling quick growth to destroying jobs. All of these powers have useful functions under the right circumstances, and we really don't want Congress to make decisions about the economy based on the interests of powerful lobby groups. The Grayson-Paul bill wouldn't do anything of the sort. As John Nichols explains for The Nation, audits of sensitive economic policy decisions would be subject to a six-month lag before they could be publicly released. If the Fed needs to act fast, Congress won't be able to get in its way. The public will eventually know how its own money is being spent, however, and learn how a public institution is conducting itself.
"In other words, this is about simple transparency, which everyone should favor," Nichols writes.
The White House and the Congressional Democratic leadership need to support a full and comprehensive audit of the Federal Reserve. It's an issue of basic democratic accountability. There is no good reason why economic policy should be conducted in secret.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
On Friday, we learned that the U.S. unemployment rate officially broke 10% for the first time since the early Reagan years. This is about as bad as it gets for a modern, developed economy. No economic force takes a heavier toll on a society than rampant joblessness, and few personal setbacks take a deeper psychological toll than being out of a job for months on end. If Congress and President Obama don't do something to create jobs fast, both are going to pay a hefty political price when next year's mid-term elections roll around.
So how bad is it? In October, the economy shed 190,000 jobs and the unemployment rate jumped from 9.8% to 10.2%. That percentage is the most optimistic reading of the labor market in Friday's report. If you take people who want full-time jobs but are settling for part-time work, then add those who have simply given up on finding a job, the rate is a massive 17.5%.
The problem is not that either Obama or Congress have failed to act on the problem, but rather that they have not done enough. When Congress was moving on Obama's $787 billion economic stimulus package back in February, we were shedding upwards of 700,000 jobs a month. So the stimulus package has worked-it's probably helped keep unemployment from jumping to 12% or 13%. But this is cold comfort to the nation's 15.7 million unemployed, 5.6 million of whom have been out of a job for more than six months.
As Robert Reich notes for Salon, Obama's economic advisers dramatically underestimated how bad things would get when they crafted the stimulus package. As a result, the package was too small and unemployment has remained high. Obama needs to go back to Congress and demand more economic relief funding. Republicans will continue to whine about government spending to excuse their obstructionism, of course, and conservative Democrats will probably start sweating, too-Sen. Ben Nelson (D-NE) helped cut back the original stimulus bill in February to help boost his "centrist" credentials. This of course had nothing to do with economics or policy. Government spending is what saves the economy in a recession. In a downturn as severe as this one, it takes a lot of spending to turn things around.
But as Reich notes, Nelson and his cohorts will have a lot more to worry about in the 2010 elections if the economy doesn't actually improve over the next year. And few economists think it will. The Congressional Budget Office, which is run by a conservative economist named Douglas Elmendorf, projects an average unemployment rate of over 10% in 2010. That's worse than this year. Democrats from swing districts need to support economic relief packages. Continued economic malaise will severely hurt them at the polls.
Congress finally took some action on joblessness on Thursday, voting to extend unemployment benefits for an additional 14 weeks. If we want the economy to recover, we need people to spend money, but if people aren't working, they don't have any money to spend. So the government cuts people checks to help them get by and stimulate a demand for goods and services. Even most conservative economists thinks this is a good idea.
But as Kevin Drum notes for Mother Jones, the soundness of the policy did nothing to prevent Republicans from fighting the effort to extend benefits tooth-and-nail. The bill had to overcome three-that's right, three-filibusters in the Senate from Republicans, who held up the bill for weeks for no apparent reason. In a blog post for The Washington Monthly, Steve Benen explains the economic cost of this obstructionism: In the weeks of delay, 200,000 people looking for work stopped receiving benefits.
But extending unemployment benefits will not solve our economic woes. The total program is just $2.4 billion, a drop in the bucket compared to the trillions of dollars the government put up to salvage Wall Street. $2.4 billion is not enough to reverse the unemployment trend. Cutting the checks certainly helps, but as Matthew Rothschild emphasizes for The Progressive, we need an economic policy that actually puts people back to work. We've known for months that the stimulus was too small and watched the labor market continue to deteriorate. We need more than tweaks at the economic margins, we need a robust job creation plan.
As Stephen Franklin notes for Working In These Times, we already know that the recession has created a significant jump in the nation's poverty rate. According to official government statistics, the rate climbed from 12.5% to 13.2% in 2008, the largest increase since 1991. But the National Academy of Science thinks the government statistics are misleading, as they account for rising costs associated with medical care, transportation, child care and different regional living standards, as Franklin notes. Taking these factors into account, the National Academy of Sciences calculates the actual poverty rate to be 15.8%. That's an additional 7 million people living in poverty, for a total of over 47 million. That's more than the entire population of the New York, Los Angeles, Chicago, and Philadelphia metropolitan areas combined. What's worse, we don't have poverty statistics for this year, when the most severe economic damage was been dealt.
Workers are facing tough economic prospects around the world. Writing for The Nation, Kristina Rizga details Latvia's economic turmoil. Just like the US, overexcited bankers in Latvia inflated a massive real estate bubble that took down the entire economy when it burst. But with the bubble burst, much of the country is now out of a job and stuck with a mortgage worth far less than what they paid for it. It's almost exactly the same story we've seen at home.
No domestic economic problem is more pressing than our epic levels of unemployment. We need another round of stimulus to get people working again. If not, we'll see the same public unrest here as in Eastern Europe.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
This is part 2 of a two-part diary on two new articles that provide insight into the newly visible weakness of Obama's politics. Although I have serious disagreements with some of their content, their main thrusts are both accurate, they complement one another, and though they reinforce arguments from the left, they both primarily grounded in pragmatist arguments. In part one, I examined "The Character of Barack Obama", by David Bromwich, which was really more about the process side of Obama's politics. In this part, I turn to Michael Lind's critique of Obama's cult-like faith in neoliberalim, asking, "Can Obama be deprogrammed?".
The main thrust of Lind's piece is unassailable: New Deal liberalism worked. Neoliberalism does not. New Deal liberalism produced the broadest prosperity, the largest and most affluent middle class in the history of humanity. Neoliberalism produced a bubble economy in the 1990s that briefly balanced our federal budget, but utterly failed to stop the erosion of our manufacturing base and our rising trade imbalances.
By neoliberalism I mean the ideology that replaced New Deal liberalism as the dominant force in the Democratic Party between the Carter and Clinton presidencies. In the Clinton years, this was called the "Third Way." The term was misleading, because New Deal liberalism between 1932 and 1968 and its equivalents in social democratic Europe were considered the original "third way" between democratic socialism and libertarian capitalism, whose failure had caused the Depression. According to New Deal liberals, the United States was not a "capitalist society" or a "market democracy" but rather a democratic republic with a "mixed economy," in which the state provided both social insurance and infrastructure like electric grids, hydropower and highways, while the private sector engaged in mass production....
The transition from New Deal liberalism to neoliberalism began with Carter, but it was not complete until the Clinton years. Clinton, like Carter, ran as a populist and was elected on the basis of his New Deal-ish "Putting People First" program, which emphasized public investment and a tough policy toward Japanese industrial mercantilism. But early in the first term, the Clinton administration was captured by neoliberals, of whom the most important was Treasury Secretary Robert Rubin. Under Rubin's influence, Clinton sacrificed public investment to the misguided goal of balancing the budget, a dubious accomplishment made possible only by the short-lived tech bubble. And Rubin helped to wreck American manufacturing, by pursuing a strong dollar policy that helped Wall Street but hurt American exporters and encouraged American companies to transfer production for the U.S. domestic market to China and other Asian countries that deliberately undervalued their currencies to help their exports.
Lind is also very astute in capturing how Obama's agenda seeks to elide the deeper economic problems that neoliberalism is not prepared to tackle, and how it seeks to rationalize doing so:
Instead of the updated Rooseveltonomics that America needs, Obama's team offers warmed-over Rubinomics from the 1990s. Consider the priorities of the Obama administration: the environment, healthcare and education. Why these priorities, as opposed to others, like employment, high wages and manufacturing? The answer is that these three goals co-opt the activist left while fitting neatly into a neoliberal narrative that could as easily have been told in 1999 as in 2009. The story is this: New Dealers and Keynesians are wrong to think that industrial capitalism is permanently and inherently prone to self-destruction, if left to itself. Except in hundred-year disasters, the market economy is basically sound and self-correcting. Government can, however, help the market indirectly, by providing these three public goods, which, thanks to "market failures," the private sector will not provide.
But there is another layer that Lind gets wrong-a layer dealing with race from the New Deal forward on the one hand, and the nature of post-50s progressive politics on the other. I'll first review what Lind gets right, and why it's important to advance this perspective, then I'll look at what he gets wrong, and what its significance is.
Now is a time for economic populist specifics -- let's see if we hear any of that from Obama -- but, even more so, 'radical' economic thinking. One thing that needs to take place is a re-examination of the basic thrust of an at-present failed profession, economics ('the pro-deregulation ideology'), and its result, present-day economic policy. Here's some, from a couple of discussions last year at tpmcafe (and no, imho, the upside-down and 'one-side of a phone conversation' aspects don't compromise the understandability):
Neo-classical engineering would believe that the perfect bridge is one built under gravity-free conditions. Engineers would strive, always and foremost, to persuade policymakers to move the real world closer to that perfect, gravity-free world.
And what's wrong with that?! (snark)
Posted at June 1, 2007 10:07 AM in response to The Methodology or The People
Or we need to accept -- based on the overwhelming predominance of an oligopolistic economic real world -- that everyone will not play fair, and then regulate the resultant oligopolies intelligently.
To "make sure everyone plays fair" should not be the purpose of government. Instead, governments should regulate the economy in order to produce the best economic outcomes based on the values expressed by the people who elect those governments.
For example, economic security is often associated with economies that are predominantly oligopolies/oligopsonies well-regulated to ameliorate some of the counter-productive features of such economic arrangements. If economic security is a high priority for the citizenry, and I think it is, then economic policy should favor less competitively 'cut-throat' economic arrangements in favor of smartly regulated oligopolies/oligopsonies.
Posted at June 1, 2007 9:59 AM in response to The Methodology or The People
I wrote my diary "'Obama And Elitism' In George CostanzaLand" as an antidote/analysis of the ridiculous spin we're seeing about Obama's elitism from other hyper-elitists. But beneath all the spin, there are serious issues, as Robert Oak reminded me:
the meme
Obama is wrong, very wrong and so are many people on the blogs. Calling rural America gun toting fundamentalist, protectionist, isolationist, racist xenophobes is not how to win friends and influence people.
This theme of either you are for open borders or you are a racist xenophobe has been going on for a long time and yes this isn't the first time I've seen this sort of rhetoric and framing coming from Obama.
Somehow, people thinks it's perfectly ok to name call like this on the left and frankly it's not.
It's also not what is happening on the ground, in small town jobs and factories, in manufacturing jobs. Jobs are being offshore outsourced, China is a major economic and also a military threat and yes we have a biased trade treaty with China to move jobs offshore. Just look at the trade deficit to see the facts.
Look at the costs of illegal immigration and just how much wages have dropped in a series of occupational areas (meatpacking, construction, landscaping).
These economic issues are real. Worker displacement is real.
I get the feeling people who are blogging all have trust funds or somehow identify with affluence and have never even driven through the rust belt, or gone to Detroit or even talked to local workers as they go about their errands never mind have ever lived in a blue collar area or in rural America.
The issue isn't bitter, or frustrated, the issue is Obama does not have any policy positions that will truly rebuild our manufacturing base, stop the flow of illegal labor, not endorse the corporate controlled global migration agenda, take on China both in trade and military agenda and truly support and raise up the American people.
Take for example NAFTA. Obama does not have any policy to really renegotiate trade agreements. Worker and Environmental standards will not
stop labor arbitrage through these trade agreements. The tariff schedule from China alone ensures that. Adding insult to injury by name calling these people just solidifies some philosophy that all
of these very real issues, with real statistics, real data proving they are real, Obama is going to ignore because somehow it goes against some personal philosophy....the facts that is.
What I find amazing is how so many people are so out of touch, they cannot even realize what the insult in those statements is.
Close your computers and open your eyes. Volunteer for Barry Welsh (IN-6th) and get out there and talk to people in an area that has truly been decimating by much of their complaints. Listen to these people and realize what they are saying is valid. The complaints from rural America are real, these are real economic issues and has nothing to do with some sort of perceived cultural identity as is being assumed.
They don't trust the candidates because Candidates are not offering solutions which address these issues and put US workers first, simple as that.
I thought Robert was missing something in the dynamic of the moment, which was important for the point I was trying to make in the diary. But ultimately, the whole point of the sort of analysis I was doing was to fight systematic obscurantism, and, ultimately, to refocus attention on things that actually matter. And since Robert's comment did precisely that... well, why not make that the subject of a diary?
While the choices for President slim down to next to none, one might evaluate positions instead of joining the various cheer leading camps. Who, overall has the best trade, economic positions to stop this global train wreck?
Firstly any group name calling someone protectionist because they acknowledge the obviously massive ~5.6% GDP trade deficit, is obviously not basing their economics on anything remotely resembling reality. The reason I link to this Pro Obama group is because they want more bad trade agreements. They assessed Obama as more of a corporate free trader than Hillary. Below are some statements from the two for easy comparison contrast.
With the Democratic Senate seemingly hell-bent on granting retroactive immunity to telcos that helped Bushco spy on Americans without a warrant, Chris Dodd stepped up to try and bring a halt to the madness by announcing a hold on the bill after it passed a committee vote. Then, Thursday afternoon, at Firedoglake, Jane wrote:
Well this is quite shocking:
Tim Starks of Congressional Quarterly reports that Senate Majority Leader Harry Reid (D-NV) plans to bring the Senate's surveillance bill up for floor debate in mid-November. That's despite the hold that Sen. Chris Dodd (D-CT) plans to place on the measure - something first reported by Election Central's Greg Sargent.
I'm a bit confused here. This just doesn't happen. So I chatted with someone I know with extensive Hill experience, who said:
"I can't think of one time when Harry Reid went around his own. It's just not normal for a leader to do that to his own side. Sometimes you'll go around Republicans, sometimes they'll use holds to be "spoilers," but that happens to the other guy. You just don't do it to one of your own."
Consider what happened when Chris Dodd introduced the Emmet Till cold case bill, which called for more money for unsolved civil rights crimes. Tom Coburn put a hold on the bill - and Reid just let it go. The bill died.
Strange set of priorities you've got there, Senator Reid.
I hope Dodd fights this one like hell.
Outrageous as this is, it's a perfect illustration of a point I didn't quite make as emphatically as I had hoped to with a diary series [links below] I did two weekends ago: that Democrats are as bad on political process as Republicans are on policy in cognitively similar ways. And so I return to that task on the flip.
STATE BLOGS
