| The Nature of America's Problem
Phillips offers two views of the economic problems we face. First, he ticks off, what he calls the "seven sharks":
BILL MOYERS: So who do you trust anymore? I mean, you write in your book that the most worrisome thing is the extent of official understatement and misstatement, the preference for minimizing how many problems there are and how interconnected they are.
KEVIN PHILLIPS: Well, just to give you an example of how many there are, Alan Greenspan has finally decided to admit, you know, this may be one of those once-a-century biggies. Well, what makes it fascinating is that I sometimes use the description "seven sharks." There are seven sharks in the tank with the economy.
And the first is financialization because we're so dependent on this industry that's sort of half lost its marbles. The second is that you have this huge buildup of debt, absolutely unprecedented anywhere in the world. The third is you've now got home prices collapsing. The fourth is you've got global commodity inflation building up.
The fifth is you've got flawed and deceptive government economics statistics. The sixth is that you've got what they call peak oil where the world is, to some extent, running out of oil. So it's not just commodity inflation, it's a shortage of oil. And then the last thing is the collapsing dollar. Now, whenever you get this sort of package in one decade, you got a big one. And when Greenspan says it's a once a century, I think it's another variation but on a par with the Thirties.
Second, he draws on world-historical comparisons-comparisons he first made five or six years ago in Wealth and Democracy, to the three previous dominant world powers: Spain, Holland and Britain.
I wish I could say that there's a blueprint that would get us back on the right track. But my sense of histories previous goes to the one or two percent leading world economic power is you don't get back on the right track.
BILL MOYERS: So what happens?
KEVIN PHILLIPS: You go through a painful adjustment process. The British were absolutely top dog in the world in 1914. Two world wars and 35 years later, they were having, after World War II, they were having food rationing, the pound sterling crashed, dukes were giving guided tours of their castles because they couldn't afford to maintain them otherwise. Doesn't take long. And I'm afraid the United States is coming right into that period which marks a couple of decades coming up that are going to be very difficult for America.
This is an incredibly grim prognosis, so it's no wonder that no politician wants to talk about it. But if there's going to be any chance to soften the blow, we're going to have to talk about it. And the longer we put it off, the harder it's going to be.
The Middle of the Problem
On the subject of how long it's going to take, how long we're going to be in the "fire-fighting mode", as opposed to the "cleaning up the mess and rebuilding mode", Phillips had this to say:
BILL MOYERS: Is there any consolation in being right when the conditions are so bad?
KEVIN PHILLIPS: Well, I guess there is in one narrow, little niche. But I do have the feeling that this is going to be a big one, that I hate to use the term "innings." But let's say I don't think we're too far into the ballgame. I think we have more of a ballgame to go than we've had. So, yes, I think it's going to be a real problem.
And just to be clear, he wasn't talking about the ballgame starting in the last few weeks. In his American Prospect article last May, "Bubble and Bail", he began thus:
As of spring 2008, we're probably just a third of the way through the unfolding debacle in the housing, credit, and financial markets. In political and regulatory terms, the ultimate problems and remedies have only begun to define themselves.
We're not just looking at an ordinary recession. Since the 1970s, the United States has redefined itself from a manufacturing nation to a financial economy built on debt, leverage, and a considerable ratio of speculation. Both political parties have been complicit in this, and the downturn now beginning will be unusual and potentially tragic.
What's more, in that article, he noted:
The last two presidential elections where major economic weakness was front and center -- 1980 and 1932 -- had ingredients and predicaments that dated back several years or more, and both out-parties had their election arguments reasonably at hand. Even so, the consequent economic reform and policy debate stretched out for two to three additional years. As of April 2008, we are further behind this new cycle's analysis-and-debate curve.
The Bastards In Charge Problem
In the introduction, I put this more delicately:
(3) The Democrats are tightly connected to the gang that caused the problem in the first place. The Bob Ruben wing.
But, when we're talking about the grim future Phillips has described, the time for delicacy has passed. Hence, calling like it is: The Bastards In Charge Problem. First a little capsule history:
KEVIN PHILLIPS: It's been a bipartisan phenomenon. You can go back to the 1980s and say Reagan and George Bush, Sr., got a bubble started. Clinton got in and got an even bigger bubble going. And then George W. Bush with the biggest bubble of all. But it's not that the Clintonites didn't play. They did. Bob Rubin as Secretary of the Treasury - I mean, if he was a Hindu and he was being reincarnated, he'd come back as a pail because this guy bailed out everything you can imagine. They had the Mexican loan bailout. They had the long-term capital management bailout, the Russian Southeast Asian currency bailouts.
BILL MOYERS: All of which, however, kept them from coming into this economy, into our economy, coming to our continent.
KEVIN PHILLIPS: Well, except that a lot of the liquidity they created and the momentum and the borrowed money produced the implosion of the bubble in 2000. And a lot of what was imploding was the $2.5 trillion in new debt that was tied to energy and telecommunications, that's Enron, WorldCom, and Global Crossing. So there was a lot more of a bubble blown up there.
Rubin was also central - Democrats more than Republicans in a lot of ways with the Clinton Administration - in getting rid of Glass Stiegel, was the old restriction that the banks couldn't tie up with brokerage firms and insurance companies. Well, basically after they made their reform led by Clinton and by Bob Rubin, you had like four-color linguini here in a bowl. It's all mixed up together.
BILL MOYERS: So you have it - for this disaster has bipartisan parentage.
KEVIN PHILLIPS: Absolutely.
So, enough of the criminal past. Now for a bit on the dismal prospects:
BILL MOYERS: No, I was going to say Obama's trademark rhetoric of inspiration seems to desert him when he talks about economic affairs.
KEVIN PHILLIPS: He doesn't seem to have anything very specific to say. That's part of the problem. A second problem is, for me at least, you know, just as I can't believe that John McCain ever wanted to get his economic advice from Phil Gramm. I mean, Phil Gramm, a former Texas Senator, appalling. He and his wife were known as Mr. and Mrs. Enron because they were so flagrant, that's McCain.
But then you've got Obama with Bob Rubin and he doesn't have any problem with the hedge fund types. I mean, one of the Chicago people was a major financer of his. He gets a guy to pick his vice-president. Turns out to be somebody who was part of the Fannie and Freddie mess.
So I don't exactly see Obama as this fellow riding in on a horse who represents all kinds of reformism. It's an important thing probably to have to change from the Republicans but I don't see that he is free of the ties to finance and Democratic Party financial types.
The Democrats' Internal Political Problem
Of course, the Rubinites aren't the only ones in the party. Which means we're headed for one helluva fight:
KEVIN PHILLIPS: Well, I mean, there's several difficulties here. First of all, at this point, what you've got are the Democrats are the party right at this point that's getting most of the financial money. When Franklin D. Roosevelt won in 1932, we know he wasn't getting most of the financial money.
The second thing is I don't think we're more than partway through. The Democrats think it's going to be another 1933, they get in there, they can do all the New Deal stuff. My feeling is that they're coming in halfway and they're going to have to make hard decisions that are going to eat the Democratic coalition like a bologna sandwich. They're going to start civil wars-
BILL MOYERS: How come? What do you mean?
KEVIN PHILLIPS: Well, if you're going to bail out Wall Street while you're saying oh, the Social Security recipients, maybe they don't even need that money. A lot of people in the financial community basically want to push Social Security on some sort of voluntary basis and needs test it and get rid of it. Now, a lot of Democrats in the labor movement are very nervous about Obama. They put out press releases talking about Rubin-nomics because they see that the flesh of the Democratic Party carries a lunchbox. But the new soul of the Democratic Party wears a pinstripe suit.
I wouldn't call it the "soul" exactly. Wall Street ain't got no soul. "Demonic spirit," perhaps. But we all know what he's talking about. And we all know it's true. We've seen it before with Clinton, and we'd be deluding ourselves to think things have changed all that much. The world has changed, of course. The ruins of the Rubinite philosophy are all around us. But political power is often quite immune to reality in the short run.
A Glimmer of Hope???
So, will this make it impossible for the Democrats to govern? To do anything? Well, that's a huge part of the problem that Obama's going to have to face. The good news, I suppose, is that Phillips said he's talked with Obama, and Obama's read some of his books. So there's a chance-however remote, that Obama could surprise us:
KEVIN PHILLIPS: Well, I guess I would without talking out of school particularly, Obama told me one time he read some of my books. So I would be very interested and impressed if he in January started to say something has really gone wrong in this country. And I'm not sure that I or anybody else can turn it around. But we borrowed so much money.
We've let this Las Vegas version of what used to be ordinary banks in our ordinary hometowns go berserk. Our currency is having enormous problems. People are losing their homes. We've got to face up to what our problems are and talk about how this happened. Who did it? Why? Who made the money?
Well, I think if he were to start talking about I'd take him seriously. But I think half of Washington would have a problem in their stomach needing quick relief, let me put it that way. Cause you don't rock that boat. You pretend that it's a sound economy. And if it's not sound, it's nothing that the old Democratic elixir can't fix, you know? Old New Deal in a bottle. We'll have a couple of swigs and you'll be happy again. I don't expect him to level.
Neither do I, I'm afraid. But maybe that's something we can change. Maybe that's something that progressive can and should organize around-"Level with us. No more lies about where we stand."
What's It Mean For Now?
If Phillips doubts that Obama will level as President-and I agree that he won't without pressure-then what are the prospects for now, during the campaign? For levelling? Not much. Snowballs have it better in Hell. But laying the groundwork--preparing to level-that might just be possible.
What would that look like? Simple. Obama might say something like this:
My opponent has said a lot of things about me lately that aren't true. But he's said one thing that is. He's said that I don't have a solution. He's right. I don't. Nobody does. But what I do have is questions-deep questions, fearless questions. I am not afraid to ask those questions, because I know we can answer them, if we have the courage to ask them. What is the right thing to do for everyone--including future generations-not just for the wealthy and powerful. What assumptions are we clinging to that simply don't reflect reality anymore?
On the economy, as on everything else, Republican leaders are peddling fear-and pretending it's optomism. "Don't ask too many questions," they say. "Asking questions is unpatriotic." This is their basic, unspoken message, no matter what the issue is. And it's a message that's deeply at odds with what it means to be an American. We are a people who have questioned virtually everything. We have remade the world several times over, because we have been willing to question it. We have done so in our greatest hours in the past. We are ready to do so again. And I am ready to lead us in that questioning. I am not afraid of the unknown. I embrace it. The future is always unkown. I embrace. Come, let us embrace it together. We are Americans, and this is our destiny.
That's what Obama could say right now.
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