It's a real bummer to have to look at reality after the euphoria induced by the President's State of the Union Address, and the beating he administered to the House Republican Caucus. But there are a number of news items that I think should be strung together, to emphasize once again that, economically, we're still on the wrong path, and the result is an increasing danger to Democratic electoral prospects come November.
There's more downstairs. . .
First, I want to set the stage with the idea that the biggest problem with governing elites is their inability to recognize that their core economic ideology of "neo-liberalism" is causing one economic disaster after another. [Note: the term "neo-liberalism" is unfortunately the term professional economists use to denote what political liberals more easily recognize as the radical "free market" and "free trade" economic ideas brought to power by Margaret Thatcher and Ronald Reagan.] Felix Salmon reports from The World Economic Forum, in Davos, Switzerland, World hunger and the locavores
Essentially the problem is that the people on the panel have internalized the principles of comparative advantage and free trade to the point at which they are more or less incapable of thinking any other way. In a Ricardian world it makes sense for Ohio to overwhelmingly grow corn and soy, since growing corn and soy is what it does best. And because of economies of scale, it makes sense to grow just one type of each, on farms of mind-boggling size. Ohio can then trade all that corn and soy for the food it wants to eat, and everybody is better off.
Except in reality it doesn’t work like that. Monocultures are naturally prone to disastrous outbreaks of disease, which can wipe out an entire crop. The panel at Davos has a favored method of dealing with such things: the development of disease-resistant crop strains, often through high-tech and patentable genetic modification.
You can read the rest of Salmon to get the specifics of how world food production is being screwed up by elites' refusal to question, let alone abandon, their economic beliefs. Well, maybe that's not entirely true:
When I was at Davos two years ago, Michael Pollan and Alice Waters were big draws. This year, Barber is getting a lot of attention. But there seems to be a disconnect: people think of the locavores as solving a luxury problem of how to eat healthier and more delicious food in rich countries, and they’re not asking whether they have anything to teach with respect to big questions like world hunger.
That might be changing: Barber told me about a brief conversation he had with Bill Clinton, where Clinton said that he now greatly regrets a lot of the agricultural policies he put in place as president.
Next, I'll have former 1960s Wall Street economist Michael Hudson explain how U.S. economic policies regarding the financial system remain mired in the status quo:
Wall Street – and most business schools – promote the myth that the "real" economy of production and consumption cannot function without making Wall Street’s insiders immensely rich. . . There seems nothing to be done about banks impoverishing people by extortionate credit card rates, junk securities and a debt burden so heavy that it will require one bailout after another over the next few years. Present policy is based on the assumption that the U.S. economy will crash if we don’t keep the debt overhead growing at past exponential rates. It is credit – that is, debt – that is supposed to pull real estate out of its present negative equity. Credit – that is, debt leveraging – that is supposed to raise stock market prices to enable pension funds to meet their scheduled payments. And it is credit – that is, debt –is supposed to be the key to employment growth.
Credit means giving Wall Street what it wants. Regulating it is supposed to interfere with prosperity. Truth-in-lending, for example, will increase the "cost of production" by "making" banks charge consumers even more for creating credit on their computer keyboards.
This Stockholm syndrome when it comes to Wall Street’s power-grab is junk economics. Wall Street is not "the economy." It is a superstructure of credit and money management privileges positioned to extract as much as it can, while threatening to close down the economy if it does not get its way. High finance holds the economy hostage not only economically but also intellectually at least to the extent of having captured Mr. Obama’s brain – and also the federal budget, as money paid to Wall Street has crowded out spending on economic recovery.
And what are the effects? In Human Recession Destined To Continue, Economists Say, David Dayen writes,
At Davos, Larry Summers called the current economic outlook "a statistical recovery and a human recession". And leading economists not only agree with him, but see no way out of the deep hole of joblessness....
It’s hard to argue with the figures, which are just an application of Okun’s Law, relating the unemployment numbers to economic activity. This formula offers little hope that the jobless rate will even dial back to 9 percent by the end of the year – and by the time people are voting in November.
All of this suggests that a $100 billion dollar jobs bill is woefully insufficient to actually impact the employment rate. . . That spending level for a jobs bill is embedded in the President’s budget, but Max Baucus wants to even dampen that meager spending by dragging the bill through his Finance Committee.
A meager bill that doesn’t include direct job creation or something that can vault past Okun’s Law will crush Democrats in November.
But for elites at the top of the Democratic Party, it looks like it's still business as usual: Senate Democrats Spend the Weekend with "Fat Cat" Lobbyists at the Miami Beach Ritz.
So, it's of more than a little interest that Chris Bowers today writes, National House Ballot, February 1st: Republicans take their first lead:
For the first time since I began monitoring the national House ballot since October, Democrats have fallen behind. Further, they have no clar path back into the lead, as five separate polling organizations now show them facing a deficit. This includes two of the three polling outfits with weekly poll updates, Daily Kos and Rasmussen.
OK, this may get many people here upset, but part of this narrative includes the White House, as Jane Hamsher explains in, Big Banks: Unions Stopped Fighting, and the Entire Left Got Punched
Back in the day (2008) the unions were waging aggressive campaigns against private equity groups that were buying up companies, slashing their staffs, breaking their union contracts, selling off their assets and reaping millions. They led the way on the issues of corporate governance, Wall Street accountability and the Bush bailout that gave banks a blank check.
But just as the tea parties were getting going in April of 2009, the White House met with bankers in the wake of the AIG scandal who told them to put the kibosh on the harsh anti-bank rhetoric:
The banks’ message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.
And so calls went out from the White House to the unions to put a pin in it (they were holding EFCA over their heads).
They did.
Which left the field wide open for the tea parties (who were being heavily juiced by Fox News) to reap all of the economic discontent. "Our side" abandoned the field.
Which brings me back to Michael Hudson, whose essay is entitled, Mr. Obama’s Junk Economics: Democrats Relinquish the Populist Option to the Republicans.
The resulting program is not saving the economy; it is sacrificing it. What has been saved is the debt overhead – the wrong side of the balance sheet....
Confronted with the "Obama surprise" – an absence of change – the only option that many voters believe they have is to change the existing party....
What comes next had better give you a severe jolt.
The only countervailing power is that within the Republican Party a fringe of tea partiers threatens to run against more established candidates safely sold to special interests. The Democratic Party always has been a looser coalition, which may not hold together if the Rubinomics team continues to lock out non-Corporate Democrats. So a political realignment may be in the making. Financial and fiscal restructuring issues span left and right, progressive Democrats and populist Republicans. So far, their sentiments are reactive rather than being spelled out in a policy program. But there is a widening realization that the economy has painted itself into a financial corner.
What is needed is to explain to voters how financial and tax policies are symbiotic. The tax shift off finance, insurance and real estate (FIRE) onto labor and industry since 1980 has polarized the economy between a creditor class at the top of and an indebted "real" economy below. Unless this tax favoritism is reversed, more and more revenue will be diverted away from spending on consumption and investment to pay debt service and "financialize" the economy even more.
I will end with these comments on this thought-provoking thread, 3rd party musings -- a whole new ballgame, by someone who has been on the front lines.
My local Democratic Party is organized to suppress dissent
My local party isn't a social club -- it's a marketing division for whatever candidate wants to run as a Democrat (except in Congressional and Senate races, where it throws its money and official support behind the candidates recruited by the DNC). The point is to elect people who run as Democrats. Period. It doesn't matter what they believe, how they would vote, or anything else beyond their willingness to call themselves Democrats. This started in the early 80s and has accelerated since. There are enough people who believe that you shouldn't discuss issues, because people disagree on issues and you want everyone to agree to allow this to continue.
One of the first ploys was to run meetings so that resolutions are not considered (we always run out of time). When issues-oriented people began calling for all resolutions to be adopted in one quick vote, the ploy changed to having a resolutions committee that gutted the resolutions from the precincts in the name of clarifying them. For example, the health care resolution that called for single payer (HR676 to be precise) became a resolution for "affordable healthcare" (no more precision); later complaints to the county chair produced the explanation that the resolutions committee thought there were problems with HR676.
A number of corporate policy/economic resolutions were gutted in the same way, reduced from calls for specific reforms to general platitudes, which were supposedly designed to strengthen the resolutions by making them something everybody could support.
And,
The word I object to is "alternative"
What reformers face is not just a struggle for ideas, but a power struggle (as noted by some of the commenters below), and the hacks hold the high ground. They have the money, and in the short term, they can deliver more "goods and services" than the reformers.
. . . you first have to swear fealty to the party. I assume you would want more than programmatic unity around your principles. You would want Dem candidates to run on those principles. Then you go up against the argument of whether your principles are a boon or liability to winning any given race. Once you're engaged in that argument, they've got you.
Look at how they still howl about the McGovern race of 1972. Too radical, cost them the presidency. Too radical, hell. The party machine sandbagged him and threw the race to Nixon because control of the party was more important to them than control of the White House. IF you make inroads, you will be marching over scorched earth.
In summary, what most of the voting population cares about is what directly affects them, and the chances of building a better life for themselves and their children: the ECONOMY. The problem is that the political system has been bought and paid for by one specific sector of the economy. So long as we accept the reality of this status quo, the voters really have no choice but to shift their support back and forth between the two legacy parties. Unless the Democratic Party makes itself an agent of real change, by standing up to Wall Street, we run the risk of electoral repudiation, and, in the long term, something that has the potential to be far, far worse.