Connecting the Dots

We seem to be watching some kind of horrific three-ring circus in which all the acts are interconnected but not acknowledged to be so…

Ring 1: Geological/Nuclear Disaster in Japan

On March 11^th a slippage of continental plates off the coast of Japan slammed that country with a massive 9.0 earthquake and a huge tsunami. As routine as quakes are in Japan and well prepared as the Japanese were for such, the scale of this one has totally overwhelmed them. The scenes of devastation and the total leveling that resulted from the a 30 foot wall water that washed in from the Pacific Ocean ironically reminds one of the 1945 photos of Hiroshima after being hit by an atom bomb. Twisted broken rubble stretches almost to the horizon with only a few stubborn hollowed-out concrete structures left standing, with dazed survivors wandering heartbroken hopelessly searching for lost relatives and friends. Cars upside down and crumpled share space with fishing boats washed into houses. The scale of loss and tragedy is immeasurable. And to add insult to injury the latest photos show a dusting of cold unwelcome snow hiding the rusty nails and laceration producing knife-sharp metallic edges under endless piles of once life sustaining property. All that remains are horizons of hideous trash still containing the remains of loved ones. Many thousands are unaccounted in for a country that leads the world in utilizing state-of-the-art electronics with almost a German-esque reputation for keeping track of things. But as dreadful as all this is, this is only the least of it. No, something potentially worse also has weighed in - a nuclear disaster.

Japan, like most of the industrialized world, fell for the siren song of the “Peaceful Nuke” even as they suffered horrendously as the only country to ever have had nuclear weapons used against them. Now the Japanese are experiencing the downside of a reliance on peaceful nuclear energy as their Fukashima Dassii nuclear power threatens to totally meltdown. Already there has a partial meltdown of at least two reactors, and even worse the exposure of 125 tons of fuel rods from a holding pond that is reported to now be totally dry.

The hubris of the nuclear power industry and the energy industry in general in assuming that they could design out all probable dire geologic events brings to mind our own tragic oil spill in the Gulf of Mexico. But it also brings to mind the 'boys of Wall Street' who believed they had designed out all probable dire financial events with their fancy oblique tranched mortgage bonds, collateralized debt obligations and credit default swaps resulting in a global credit meltdown and a nasty deep recession that we have still not recovered from.

Ring 2: Middle East in Turmoil

This geological news from Japan rightly has pushed the geopolitical news from the Middle East rudely aside. The Middle East is experiencing an earthquake of another kind. Suddenly starting in the backwater North African country of Tunisia and spreading like a string of Chinese firecrackers, rebellion and potential revolution has erupted in one despot-ridden Arab nation after another. The Egyptians inspired by Tunisia have successfully jettisoned their dictator through a brave, relentless and essentially peaceful struggle. Their success has emboldened people all across the region to join resistance movements and wage protests.

Brutal repression and now a full civil war has erupted in Col. Muammar el-Qaddafi’ 's private fiefdom, Libya. The US and its European allies have now militarily intervened on the side of the rebels essentially declaring war on the Libyan government in what may become another expensive, protracted quagmire. 'The Qaddafi approach' already has triggered similar harsh and desperate reactions from what goes governments in Yemen, Bahrain and now Syria. Where does intervention end? Most of these “republics” were considered stable “friendly” dictatorships and were not exactly on the US State Department's shit list with the exception of the dried up hellhole (and Al Qaeda stronghold) known as Yemen. Where and how this will all end is anybody's guess. One of thing is clear the Uncle Sam needs to be stuck in another war like he needs another hole in his head.

Ring 3: Demos and Repubs Locking Horns

With Japan on the ropes with an unimaginably bad triple whammy set of disasters and the oil rich Middle East unraveling in unprecedented ways, the US also finds itself in another kind of crisis, one of a classic political nature. The US recovering from a deep recession is also saddles with a record national debt. Yet care needs to be taken not to suffocate the baby of economic recovery in its proverbial crib. Continued if not increased government deficit spending seems counter-intuitive in the midst of a period of deep red ink. But that is is exactly what is prescribed by most economists. Yet suddenly the Dreaded Deficit is front and center (which must be remembered was run up by mainly the Reagan and Bush II administrations.) The right is using The Deficit and their control of the purse strings to 'go postal.' An unholy alliance of shady billionaires, crazed libertarian anti-tax hardliners, reactionary poorly educated evangelical Christians, left wing conspiracy believing gun freaks and bought-and-paid-for Republican Party hacks are lined up against a young inexperience president (prone to preemptive surrender on key negotiating points) supported by a divided Democratic Party that has long since lost its moorings with its real base – the middle, working and under classes.

With the US oil addiction as the linchpin for supporting unpopular, despotic and kleptocratic regimes in the Middle East coupled with the oil industry's untoward influence on US energy policy, it's possible to see the connections between these three events as interlocking. The ultra energy industry-friendly Republican Party is tactically and strategically angling for a re-accession to power through whatever means necessary. So oil dependency and nuclear industry rehabilitation (despite Japan's plight) will continue irrespective of the consequences if the Repubs have their way. The nuclear industry, long since a basket case without government support, is also solidly supported by laissez-faire Republicans. Oil as a major CO2 producing and climate damaging fossil fuel, and nuclear energy both are associated with long-term deleterious effects to the environment (with Japan now getting a first hand experience.) The most obstreperous and deluded defenders or oil and nuclear power can be found in the Republican Party. And these very same deniers of the deleterious long term harm of oil and nukes are the very ones threatening to paralyze the entire US government (and economy?) if they don't get their way on a whole host of stupid, ill advised budget cuts/social agenda initiatives that will have zip effect on the looming deficit (that they have suddenly rediscovered.)

The annual US budget negotiation process is always ugly. This is where the Democrats Party and the Republican Party perennially wrangle over their supposed ideological differences. A lot of it is show. Most of the budget is locked in, and only a small sliver (12%) is ever in play. Neither side can really touch the big chunks without major legislation – commitments to the elderly and incapacitated (Medicare and Social Security entitlements) and the sacrosanct military side. And increasing taxes even in good times is always off the table thanks to 30 years of relentless right wing propaganda. This time it is really bad. Due to nearly a decade of breathtakingly irresponsible policy from a Republican president (off-budget wars, taxes cuts and refusal to reform Medicare) and now a kings hell of a recession (which wipes out revenues,) the deficit is indeed looming large in both absolute and relative terms.

To make matters worse the Repubs have interpreted their victory in the mid term election as carte blance to take declare war on all fronts: environmental regulation, public sector unions, teachers, abortion rights, publicly supported media, you name it all in the name balancing the budget. At both the state and federal level they are on the move with draconian agenda that would even make their saint, the late Ronald Reagan, queasy. The American population is just waking up to the true dimensions of their agenda. These madmen have no real idea of the implications of their actions. But if they stall the recovery and make the joblessness worse ( the number one concern in polls), all the better. It can be blamed on the Obama presidency. The GOP just wants to crush the opposition and enact their half-baked ideas and the fully-baked bidding of their corporate overlords. This has all happened because the American voters are easily bamboozled and often vote for tin-hatted charlatans, or else are they become easily discouraged and don't vote at all. So a veritable fleet of of ships of fools have commandeered the US House Representatives and many statehouses and governorships. This is a serious state of affairs to say the least. Let's just hope people wake up pretty fucking soon!

A Perverse Symmetry

I wrote this last week. It appears the tide has turned and just maybe the reactionary right has over played its hand. See the recent NY Times poll.

Anyone following the standoff in Wisconsin will see a certain perverse symmetry. A Republican dominated Supreme Court first radically alters campaigning financing rules with the Citizens United decision to allow corporations and their primary adversaries, trade unions, to spend unlimited amounts of money on elections under the rubric of “free speech” Of course the good justices knew full well this is like pitting a the NFL against some high school football league in terms of available cash to spend on elections. In the US union membership has been steadily falling from over a 1/3 of the workforce in 1945 to only 7.9% by 2004. Private-sector union membership has shrunk the most, to a mere 6.9% of the private sector workforce as of 2010, while public-sector union membership is still running at over 36% . So is there any mystery as to what is going on in Wisconsin? It is plain and simple. The Republicans Party and the oligarchy (read: a cabal of the ultra rich) that it represents is using the recession and the concurrent problems with state budgets to destroy the last surviving remnant of the union movement - public-sector unions.

So with private-sector unions on the rocks due to union busting and race-to-the-bottom global economics, Republicans and their minions in the media have of late been concentrating on undermining the support with the American public for the surviving public-sector unions. And this super recession is a perfect opportunity. The five Supreme Court (presumably opposed to “judicial activism”) who voted in favor of giving First Amendment rights to corporations and unions were obviously aware that private-sector unions in the US are in serious decline. So it was easy to allow money equals free speech for corporations and for their polar opposites, unions. Private sector unions are becoming a paper tiger, especially with the US economy seemingly permanently unable to create enough jobs. Yet public sector unions are still strong. So prior to the upcoming watershed of an election in 2012, Republicans have their long knives out for the last bastion of American organized labor - public sector unions.

And feeding into this is the perpetual dissatisfaction of Americans with our education system. This dissatisfaction is being used to undermine faith in a unionized part of the public-sector union movement - the American schoolteacher. School teaching always been an underpaid and under-appreciated profession. Teachers are constantly being pilloried and blamed in the media for all the myriad ills of the American education system. Bad teachers that can't be fired ' because of their unions' and 'their awful tenure system' is a constant refrain by the right. The underfunding and neglect of the very school districts that need support the most, those that serve the inner city poor is conveniently ignored, as is the the societal feedback loop of social decay and despair in the underclass families that serves up students with horrendous disadvantages. Instead it is all blamed on the hapless teachers who work in these drug and gang infested war zones. Perennial underfunding of education at the state level was caused by the so-called taxpayers revolt mania which started in California in the 1980s with Jarvis Gann and which spread like wildfire across the country. And, of course, there it is always easy to generate animosity and jealousy against 'government workers' by creating the perception that people with cushy 'government jobs' have it made and that the state budget crisis is the fault of their greedy, obstreperous unions.

When this stubborn kings hell of a recession hit, many states suddenly found themselves seriously in the red, and it was time to find a scapegoat. So it was easy to blame it on the defined benefit pensions and solid health plans that state, county and city workers have been able to achieve usually by trading off cost-of-living wage increases. The perpetual underfunding of governments at all levels due to tax cut madness especially for upper tiers of income is conveniently ignored. But with Wisconsin, it was only different. Compared with other states their budget deficit was only shallow hole. But one which the Republican libertarian ideologue of a governor made deeper with irresponsible tax cuts. Make no mistake this is a test case. If a manufactured budget crisis can be used to destroy public-sector unions in Wisconsin, all of the states with real budget problems will be pushovers for attacking the concept of public-sector unions and collective bargaining in general. Make no mistake this is class warfare!

Obama and the Democrats: A Fatal Under Reach?

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?

Obama Dilemma

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;

from The Second Coming by William Butler Yeats


Barack Obama is now enduring a veritable blitzkrieg of criticism from all directions. The public is sore as hell whether or not they identify with any ‘left’ or ‘right’. And everyone is predicting the Democrats are going to eat it in November. By being politically a ‘centrist’ Obama has gotten himself in one king’s hell of a bind. To the average American he is a certified ‘liberal.’ But Obama is liberal only in a relative sense. He is only liberal in this crazed post-Reagan era in which the entire political spectrum has shifted mightily rightward. It’s a world in which a Ralph Nader, once known as a respected and effective moderate reformer and consumer advocate, now sounds seems like a Bolshevik. And the health care reform plan once proposed by Richard Nixon, so hated by the anyone left of Ginghas Khan, was far better than the one Obama so exhaustively achieved. Also remember it was the Republican Nixon administration that established the now reviled by the right Environmental Protection Agency. It is a time when reasonable social policies once supported by bipartisan majorities are now considered anathema. Even unemployment insurance extension, with national unemployment hovering over 9% and way over that in some states, is now being held hostage by Repubs. It is a time when many want to revoke the entirety of FDR’s legacy.

The Obama administration by being centrist has no friends. The left wing of the Democratic party or “progressives” (and which seems to includes most Demos I encounter) have either lost faith entirely or are profoundly disappointed in Obama. Many believe that Obama, with a Democratic Party majority in both houses of Congress and a resounding mandate from the people for change, has blown his opportunity. Time after time when he should have come on strong and rallied his supporters behind a definitive game-changing program, he has backed off and equivocated so as to avoid being accused of not being sufficiently ‘bi-partisan.’ Instead he kissed up to said Repubs (who righteously ignored all such untoward overtures.) The net result is that every initiative has been a watered-down disappointment - from rescueing a totally broken banking system, to stabilizing an economy in absolute freefall, to engineering reform of our greed-bound health care system. Each and ever effort has been weaker and less effective than it could have been. Is it Obama's reluctance or was it the complex, institutional nature of each crisis? We will have to let history judge. And of course what Obama has done that has worked (the economy is no longer in freefall and the health care system isn’t quite heartless) is quickly ignored in a blizzard of “what have you done for me lately’s”

The Republicans party, knowing in their hearts that Obama’s modest and tepid initiatives were necessary if the Great Recession was not to become the Second Great Depression (which may still happen), nevertheless, are attacking him full force. And refusing to participate in the legislation process pretending he is some left-wing ogre from hell. Their plan is no plan. They openly admit they only want only one thing: his political demise. And it is to be achieved through perpetual obstuctionism. Their intention is to undermine the administration’s credibility with the beleaguered and demoralized public at every turn. And they have been very effective. Their simple objective is to regain power at any cost. But as criminally irresponsible and corrupt as the Republicans are even more so than the Democrats, they are fully owned paid reps of their corporate overlords. Yet they seem sane and reasonable compared to the raging ill-informed tea-bagger stooges, ditto-heads, and useful fools of the new ‘far right.’

In any case Obama can’t catch a break. To make matters worse the centrists in the electorate, the so-called ‘independents’, don’t align politically with Obama’s actual centrist position. These so-called independents, who swing elections and whose vote the Democrats periodically pander to each election for are really not politically center at all, they are mostly proto-right wingers. And as such they are fleeing Obama like rats off the proverbial sinking ship. Many or most of these so-called independent voters are fickle, apolitical shallow thinkers who are often swayed more by personality and style than actual proposed policies. By not committing to being ‘left’ or ‘right, liberal or conservative, Democrat or Republican, they are political AC/DC’s and totally unreliable. Often they are easily bamboozled by well-crafted propaganda (‘Swiftboated’) and Internet blogger bullshit. In fact it’s these so-called “independent voters" that requires ever more grotesquely expensive advertising media campaigns (read political propaganda) by candidates.

The real centrists appear mainly as the chattering classes - the windbag pundits (such as NY Times’ David Brooks) and the professional journalists and media talking heads. They are often accused of being part of some shadowing Liberal Media Establishment conspiracy but basically they are simply well paid media personalities, celebrities basically. They simply are out to further their own careers - ideally by provocation and sensation. But paradoxically the net effect is to actually anchor things at or near the center even as they often disdain from defending Centrist Obama. And this is fine with their corporate overlords as a strong center or center-right maintains the status quo. Essentially Barack Obama has few friends in the media.

In most democracies it’s always two against one. When the left is in (not in the US so much since we have no left or even center-left political parties), the center and the right gang up on the left. They do this by carping at and discrediting the left's policies and by exaggerating and missteps or mistakes and downplaying or ignoring any successes, always waiting for the next election. And when the right is in, the center and left must work to oppose the right’s usually upper class-biased, often reactionary and demagogic programs.

And so it follows when the center is in, like the for instance the Obama administration, the right and left, attack from both flanks. Being outflanked Obama has nowhere to turn. I watched key Obama adviser, David Axelrod, field hostile questions from CNN’s Candy Kurlick (she looks like she eats too much candy.) She alternately attacked him from both directions – pro ‘progressive’ and pro ‘teabagger’. Of course Obama, as most Democrats do at election time, pretended to be more of a left/progressive than he would (or could be) in office. And the right, always ‘working the refs’ exaggerate their disdain and alarm at his so-called ‘socialist policies.’ Barack Obama might be a lot of things but he is certainly no way a socialist. If anything he is the polar opposite. He did his undergraduate work at University of Chicago, the citadel of neo lazzie faire capitalist theory, the home of Milton Friedman, the godfather of neoliberalism. In fact his economic brain trust and key appointments are either Bush holdovers – Republican Ben Bernake as head of the Federal Reserve or Wall Street friendly, such as Tim Geithner as Sec. of Treasury who is a protégé of Goldman Sachs alumni and arch neoliberal Robert Rubin, and Laurence Summers as Chairman of the Council of Economic Advisers, who performed the same service for the Reagan administration, where this all started.


The underlying problem is that with this current global economic crash we are in uncharted territory. Which is the true boogieman? Is it Weimar Republic/Zimbabwe level of hyper- inflation? Or is it a full-on 1930’s type Second Great Depression with paralyzing levels of deflation. Even Obama’s conservative economic advisers are worried more about a deflationary double dip in a possibly economic recovery than runaway inflation. A faction no doubt is arguing for a second stimulus package as politically difficult as that may be. But conventional wisdom and intuitive inclination especially outside of the administration and economic academia is more concerned about the ever-growing monstrous US budget deficit - $13.2 trillion and counting. How can we borrow so much without triggering runaway inflation? Where is that money coming from? Who will pay it back? When will the cost of borrowing suddenly go through the roof? Already the interest alone is billions a day. And any stimulus package will kick it up even more. Yet without another stimulus to jolt the faltering recovery we may sink into a dreaded double dip. People that are still working are worried about a sudden loss in value of their money; people that are out of work are worried having suddenly having no money as their unemployment insurance runs out. And yet projections show even a greater rate of growth in the deficit as more people retire and go on Social Security and Medicare. All of this is being milked by the suddenly ‘fiscally responsible’ right. They want more than anything for Obama to fail even if many suffer in the process.

Keynesians, economists who adhere to John Maynard Keynes’ theories, which were credited with saving capitalism from the last great depression, argue that only by getting the economy growing again will the upturn be created. As economic activity increases there will be less payout of entitlements and more tax revenues. Furthermore, Keynesians worry about serious deflation setting in, something has not happened since the Great Depression. Deflation on the face of it sounds good - a lowering of prices, things get cheaper. But it is actually devastating in an aggregate sense since it re-enforces the downturn turn in business activity, since as prices falls consumption is postponed and weakened.. Some economists (see Paul Krugman in NY Times 7/12/10) believe we are already on the cusp of such a phenomenon.) But spending more when you are broke or deep in debt is counter intuitive to the public. So Republicans (and some Democrats), who were quite understanding when Ronald Reagan and GW Bush were pumping the red ink, are now suddenly ‘very concerned’ and are rallying the public against the ‘exploding deficit.’

If all goes as predicted, there will be a wholesale flushing out of Democrats come November and Obama’s program(s) such that it is(are) will come to a screeching halt. All the non-ideas and failed ideas of the Republicans will the get another chance for consideration – such as further deregulation (more oil spills, salmonella outbreaks and mine cave-ins,) lower taxes for the rich (more irresponsible speculation) wholesale cuts in entitlements (retirement at 70?), further denial of climate change (unequivocally passing the point of no return), revocation of the New Deal (privatization of of Social Security) and so on.

Maybe things have to get really bad before they can get better. Or maybe we will just have to endure and console ourselves that we had a nice a run while it lasted….