In The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein convincingly argued that "free market" capitalism did not spread worldwide because people welcomed it freely, but because it was forced on them against their will, imposed through a series of shocks--military coups, financial crises, physical disasters--that left people, and entire societies reeling, unable to get their bearings, much less respond critical to the most critical of situations.
Now, however, we've reached a critical turning point: the entire system that was built up by Shock Doctrine strategy is itself coming apart at the seams--and now, rather than standing back, and saying, "Now wait a minute!" the elite consensus in most quarters is to double down on our past mistakes. Now, the very shock of the systems collapse is being used to try to extend it--not just a little further, but far further than ever before.
The main focal point of this effort is the two-pronged battle to (1) prevent anything close to an adequate fiscal response to generate a full-employment recovery, and (2) prevent anything close the necessary re-regulation of the financial sector, so that the national and world economy can be restored to a sound financial foundation. The Obama Administration double-faulted on these twin challenges within its first few weeks in office, and things have been going downhill ever since.
Now passive failure is being turned into active malevolence, as Obama has appointed a commission to address the issue of America's long-term debt--a problem that only exists in the far long term--2050 or so, and only then because we've had an out-of-control health care sector for almost as long as our financial sector has been out of control--as I argued in my diary "Health care costs over time--how the US became so different & why conservatives can't fix it" earlier today.
Earlier this month, economist Dean Baker warned against the folly involved in a column titled "The Budget Deficit Crisis Crisis", which began thus:
The country faces a serious crisis in the form of a manufactured crisis over the budget deficit. This is a crisis because concerns over the size of the budget deficit are preventing the government from taking the steps needed to reduce the unemployment rate. This creates the absurd situation where we have millions of people who are unemployed, not because of their own lack of skills or unwillingness to work, but because people like Alan Greenspan and Ben Bernanke mismanaged the economy.
It should be noted that this situation should be impossible if the "magic of the marketplace" were real.
Free market ideology cannot explain unemployment except as a voluntary choice on behalf of workers. When millions--nay, tens of millions of people suddenly decide not to work, what's an economist to do? That alone ought to be enough to banish these cretins from the stage forever. Instead, they're running the whole show.
Note: I'm greatly encouraged by the news that the Collins-Nelson betrayal may be cut off at the pass. But just to make sure we all understand just how bad their proposal is, I'm posting this diary anyway.
To be effective a stimulus requires four things: (1) that it be quick, (2) that it be effective, (3) that it avoid counterproductive measures, (4) that it be sustained long enough for the economy to fully recovery before being phased out. So far, the Blue Dogs have focused on making sure the stimulus will fail because of #4 (insisting on immediate reimplementation of PayGo). Now Collins-Nelson are going to war against #s 1-3.
(1) State spending is quick: So quick that if Congress doesn't give them this money by President's Day, they'll start cutting it from the budgets they are working on now.
(2) State spending is effective: As shown in my diary, "Stimulus Reality: Spending Creates VASTLY More Jobs Than Tax Cuts", "General Aid to State Governments" produces 920,000 jobs per $100 billion in spending, compared to 200,000 jobs created by cutting corporate taxes by $100 billion.
(3) Allowing state government spending to plummet is directly counter-productive to the intent of the stimulus package. "Cuts in state and local government outlays are sure to be a substantial drag on the economy in 2009 and 2010," Moodys.com Chief Economist Mark Zandy wrote in his analysis, "The Economic Impact of the American Recovery and Reinvestment Act Mark Zandi - January 21, 2009" [PDF]. During the Great Depression, state public works spending plummeted so severely that it completely offset the increases in federal spending for the first three years of the New Deal (1933-35). This was a major impediment to recovery.
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