Barack Obama (and Harry Reid leading the Demos in the Senate) seem to have frittered away a rare opportunity for real change. With their reluctant, diffident, non-confrontational, filibuster-shy approach they have achieved the worst of both worlds – virulent ire from the right and crushing of all hope on the left. On issue after issue this administration has come on too weakly and compromised too soon against a ruthless adversary that takes no prisoners: health care reform, not prosecuting the torturers in our midst, postponing real confrontation with the doomsday scenario of impending climate change, ignoring the environmentalists on the risk of offshore drilling, not reversing the Bushian Justice Dept’s draconian overreach, letting the banks call the shots on a bailout of a mess that they made, and most of all failing to robustly address the Great Recession.
Of course the rescue of the economy is still a work in progress, but it’s not going well. In early 2009 we needed a seriously large stimulus that was well designed, without gimmicks (like tax breaks) and implementing visibly useful public works projects, infrastructure overhaul and a wholesale green re-engineering of the economy. If implemented in concert with a massive “bully pulpit” campaign informing the public as to the impending global disaster of climate change, Obama could have produced the public support necessary to hold off the opposition. But no, we got a typical half-measure (even though the numbers seemed large) that satisfied no one.
That said, please don’t vote for a Republican as a protest of the Obama administration’s disappointing performance thus far. As bad as the Democrats are we must support them. A return of the Repubs by their attaining a majority in either house of Congress will be an unmitigated disaster. They have no answers!
The Bushian dead-enders, the racists, the hardcore right, libertarian ideologues and the Repubs in Congress will hate and oppose Obama whatever he does. And an organized Fox Channel/hate AM radio supported, loud, ugly, ‘tea party’ type backlash was inevitable. Whatever was proposed by the Democrats, be it tepid ‘boiler plate’ moderate Republican programs (as it appears to be), or a mildly reformist agenda (as it could have been) or a true break with the past (which was possible), the right would have been livid with rage.
But ask yourself where would we be if the McCain/Palin “team” had gotten in? John McCain had no plan at all for an economy that had just plunged off a cliff (in fact even he admits he dislikes economics.) Look at him now as he skidaddles to the extreme right shamelessly abandoning all previous reasonable positions (climate legislation, immigration, campaign finance) to save his butt. We might have had more budget busting wars, though. And Sarah Palin (one heartbeat from the Presidency) is a certified airhead who resonates only with others of her ilk. To everyone else she is either a dangerous demagogue or a broad (excuse the pun) target for derision.
Recall that by January 20, 2008, Inauguration Day, the US economy was in full free fall. Remember the entire banking sector had seized up and we all were relying on the Federal Deposit Insurance Corp (a ‘liberal Democrat’ FDR Depression Era reform) to keep our bank’s doors open. Unemployment was in vertical ascent, the auto industry was a basket case and most of us our houses had lost 1/3 of their value.
Now less than two years later things still suck but they suck a little less. Or maybe it’s worse in the sense that we now all of us are thoroughly disabused of any ‘audacity of hope’ campaign bullshit. Obama’s corporate alignments and abandonment of his base has won him enemies on all sides and few allies as Yeatsian centrifugal force sets in.
The fight in Congress now should be over another major stimulus package as we seem to be falling back into the dreaded ‘double dip.’ But it’s not. That battle is already lost due to the widely held perception is that the first $830 billion was a big fat flopperoo. Why throw good money (we don’t even have) after bad? The Repubs, of course, fuel this belief. But what was avoided will never be known. And how bad it might have been is simply unknowable. It’s impossible to prove a negative. But it certainly didn’t fix things entirely. As most economists predicted it was too small. The typical Obamaian reluctance to swing for the fences is now biting him and his party in the ass.
The Republican Party’s plan is simple. They want things to get even worse. They offer no credible plan for the economy other than to further sabotage of the Democrat’s agenda through recalcitrance. They can only drag out their tired old warhorses: “more tax cuts” and “cutbacks in entitlements.” But it’s even uglier than that - they want to retain the budget busting tax cuts put in by Bush for millionaires and billionaires, tax cuts that didn’t do jack shit for the economy. It only fed cybermoney into a feeding frenzy of disastrous financial speculation that almost brought down the whole global banking structure. The big buck buckaroos won’t invest their money in new factories and jobs in the US. Forget it! Their money earns greater returns in firms that offshore manufacturing by availing themselves of cheap labor and environmental law free zones.
In the last great economic downturn the FDR administration reluctantly adopted the theories of John Maynard Keynes. Once that happened the Great Depression became significantly less onerous. Keynesian fiscal policy is the idea that government should makes up for inadequate aggregate demand during downturns in the “business cycle” by deficit spending. And then repay the deficit by taxing it back during the upswings. The old ‘priming of the pump.’ This policy was dominate and not even questioned by either party up until the 1980’s. Then something called ‘supply side’ economics came on the scene. It is the disreputable cousin of them more academically respectable Monetary Theory. Monetary theory is the ideological adversary of Keynesian theory favored by conservatives. All of this is tied into the rise of something called neoliberalism, which actually negates ‘liberalism’ as understood by most people.
For a number of reasons Keynesian theory fell out favor by the late 1970s, one reason being that it seemed to be failing. Something called ‘stagflation’ had set in. During the heyday of Keynesian theory it was normally accepted that inflation was a tradeoff for growth. As the government spends money, the demand for goods and services would sometimes outstrip supply and force prices up - hence inflation. But at least unemployment was tolerably low even as prices crept upwards. But in the late 1970’s, the hapless Jimmy Carter years, we experienced both flattening growth along with inflation. Energy costs (mainly oil) went through the roof and was probably the main culprit but the anti-government spending ‘monetarists’ and their allies on the right, the flakier ‘supply siders’ (AKA “voodoo economics”) advocates stepped into the breach. The ‘supply siders’ purport to believe in a notion long since discredited, “Says Law”, that supply creates its own demand. Following from this they (pretend) to believe in the ever appealing but manifestly erroneous idea that if you lower taxes the amount of economic activity generated, the supply side, will create enough demand and thus enough economic growth will occur to compensate for the lost tax revenues. But unfortunately it doesn’t work!
The Republican, Ronald Reagan (and later his imitator, Bush II) lovingly embraced this bogus concept and as president(s) implemented it – result massive, bone crushing deficits. The irony is that (old style moderate) Republicans always hammered the Democrats over modest Keysensian deficits, but as born again ‘supply siders” they ran the deficit through the roof. The real reason obviously is to tie the hands of successive Democratic administrations from implementing popular social spending programs – schools, health, welfare, infrastructure. And it has worked. It worked with Clinton and now it is working with Obama only on a more profoundly disastrous level. The deficit is now $13 trillion and growing. How do you public support for more spending to counter the worse recession since the 1930s with that backdrop?
The Monetarists, led by Milton Friedman, believed business cycles can be better managed by varying the money supply through the Federal Reserve – fiscal policy. They basically want the government out of the way especially regarding regulation of business. From this flows neoliberalism embraced in recent years embraced by both political parties. Also in practice both Keynesian and Monetarist principles are used, fiscal and monetary policy, to (try to) manage business cycles as both have their virtues. For one thing the Fed can pump money into the economy without going through Congress. And of course the government is always inextricably entangled in the economy through military-related spending - AKA “Military Keynesianism.” What the right is opposed to is Keynesian social spending, the very thing that mitigated the Great Depression. The Great Depression had a ‘double dip’, too (what many are afraid of now) as the FDR adminstration pulled back in government spending in 1938 due to pressure from the GOP. But the (military) Keynesianism eventually saved the day due to massive deficit spending to fight WWII.
We need another Keynesian social spending injection now but we won’t get it. The right is too influential and the most of the public have never taken Economics 101. We need another blast of deficit spending to overhaul our infrastructure and to implement climate saving ‘green technology’ on a large scale. But instead what we have forming is a political tug of war between the still employed (the majority) who have been encouraged to worry about “Obama’s deficit” (that he inherited most of it from Reagan and Bush II) and the un and underemployed who are increasingly desperate. As we cut back on spending it will get worse but it will be blamed on the Democrats. We are following the same path the Japanese took in the 1990s.
Americans seemed to be ‘ahistorical’ even regarding recent events and only respond to the siren call of the moment. Hence during crisis periods those with the least intellectual integrity and the most visceral appeal can step into the breach and rule the day. It’s sad but true from Richard Nixon to Ronald Reagan to George W. Bush we have had to endure fools in times of crisis. Where do we go from here? Which well-coifed, golden tongued, empty-suit charlatan will step forward to lead us down the primrose path?
