Skip to main content

This past weekend, we’ve learned from two separate reports, via Carrie Budoff Brown and Glenn Thrush at Politico, and Jeff Zeleny and Jim Rutenberg over at the NY Times, that it appears our Party is either uncertain about the content of its economic talking points in the upcoming election cycle, and/or it intends—for the most part—to recycle 2010’s economic memes in 2012.

Seeing as how that strategy worked out so well for Democrats last year, this would all seem perfectly reasonable to me...if I was a Republican. (I’ve been a diehard Dem since my 18th birthday, in 1975. The Boston Globe once noted in a front page story, back in 1980, that I–along with about six or eight others–was “born Democrat and christened a few weeks later.”)

Over the past 2-1/2 years, there has been no significant improvement in our nation’s jobless numbers. Residential real estate has gone from bad to worse, eclipsing the depths it reached during our Great Depression. Wall Street’s mortgage behemoths have sucked the lifeblood out of the middle class. There has been no effort to reign in the too-big-to-fail banks, and, as a result of that failure those banks are more powerful now than they were when the President took office. The DoJ has failed to prosecute any of the key people primarily responsible for the mortgage industry’s blatantly fraudulent practices of the past decade–practices which got us into this mess in the first place. And, income inequality between our nation’s haves and have-nots has worsened to the point where it, too, is now setting records unseen since reliable metrics were first implemented to measure those class disparities, back in the nineteen-teens.

Throughout the development of these inconvenient truths in our society over the past few years, there has been much bipartisan chatter about righting these wrongs via “shared sacrifice” amongst the haves and have-nots within our society. But, the truth is that the middle and lower classes are paying the freight for the past three decades of Wall Street’s (and the top 10% of our society that–depending upon which numbers you believe–owns somewhere between 92% and 98.5% of all marketable investment vehicles sold by the U.S. financial services sector) ongoing privatization of its profits and socialization of its losses. It’s to the point where this is not just the truth, but, unlike most inconvenient truths such as this, it’s become the political zeitgeist of our time, as well…at least everywhere but in Washington, D.C. and parts of southern Manhattan.

Today, I’m asking Democrats the basic question: “Where is our party going as far as all of these economic nightmares are concerned?” And, the answers I’m seeing and hearing, based upon MSM stories over the past 48 hours, is everywhere but where our Party’s been successful in past election cycles; and/or, more precisely, in the same direction our Party went just eight (plus or minus) months ago.

Our economy is in crisis. There is a demand problem. IMHO, right now, it transcends our nation’s debt woes (at least if you’re a believer in New Keynesian economic thought, such as I am; and it’s why my posts frequently highlight the commentary of our country’s leading New Keynesian thinkers, such as Paul Krugman and Joseph Stiglitz). It was created by three decades of unbridled pillaging of the underclasses by the status quo. In many ways, it’s getting worse, not better. And, this leads us to the inconvenient truth that–at least from a pragmatic political standpoint–it has not been sufficiently ameliorated by the current Democratic administration.

There are obvious solutions to these problems.

(Diarist’s Note: Naked Capitalism Publisher Yves Smith has authorized diarist to reproduced her blog’s posts in their entirety for the benefit of the DKos community.)

“Debtors’ Prison”: Bob Kuttner on the Costs of Rentier Rule
Yves Smith
Naked Capitalism
June 6th, 2011

Bob Kuttner has an elegant and important article at American Prospect, “Debtors’ Prison“. It’s an evocative, historical form of the argument made here and elsewhere: that advanced economies have gone down a disastrously bad path in not writing down debt that can’t realistically be paid.

The usual poster child for “why not writing down debts is a bad idea” is Japan, but that isn’t gripping enough to evoke the right responses. Even though its post-bubble growth has been dreadful, Japan is still a well-run, tidy country with a low crime rate, universal health care, long life expectancy, and tolerable unemployment. That in turn is due to factors that do not obtain much of anywhere else: Japan was very cohesive to begin with, and its elites chose to have their incomes fall relative to everyone else to save jobs. Wage compression at large companies has increased dramatically. This is the polar opposite of what has happened in the rest of the world, where the gap between the haves and the have-nots has widened.

Kuttner provides another set of examples as to why we need to get the creditor boot off all our necks:

Economic history is filled with bouts of financial euphoria followed by painful mornings after. When nations awake saddled with debts incurred to finance wars, episodes of failed speculation, or grand projects that haven’t paid off, they have two choices. Either the creditor class prevails at the expense of everyone else, or governments find ways to reduce the debt burden so that the productive power of the economy can recover…

The creditor class views anything less than full debt repayment as the collapse of economic civilization. In fact, however, debts are often not paid in full….Bankruptcy ingeniously provides orderly relief from past debt so that the productive enterprise is not needlessly destroyed….But the same business elite looks askance when others—homeowners, small nations, the entire economic system—seek relief from punishing and economically perverse debt….

History’s two great negative and positive examples of how to deal with unsustainable debt are the periods after the two world wars. At the 1919 Versailles peace conference, the creditor mentality prevailed, and Europe’s postwar recovery was aborted. Britain and France imagined they could bleed defeated Germany to pay off their own immense war debts (mostly to the United States). Britain also pursued tight money to keep its own currency valued at prewar levels, in order to protect the creditor class.

The policy wrecked the German economy and kept British unemployment above 10 percent for two decades. The great critic of Britain’s folly was John Maynard Keynes, then an adviser to the British Treasury. Keynes’ 1919 book, The Economic Consequences of the Peace, prophetically warned that the policy of squeezing Germany until “the pips squeak” would cause depression and a second war. After World War II, history history gave Keynes a chance do it right. His Bretton Woods system emphasized domestic recovery in the defeated as well as the victorious powers and created a global monetary system in which private financial speculators were denied the power to compel nations to pursue deflation.

Today, that expansionary logic has been reversed and creditors are once again hegemonic. Banks want cheap money for themselves, draconian terms for others. The banker-afflicted European Union is punishing Greece rather than finding a way to let it grow. In the United States, relief is denied to underwater homeowners because debt contracts are sacred, even as the policy prolongs the agony. Everywhere, budget austerity is advertised as the road to growth— though it denies the economy its productive potential.

Just as Lenin said capitalists would sell him the rope with which he would hang them, so too do ordinary people seem to be putting their necks in the banking class debt noose by siding with the rentier austerity logic. Until they decided to loot entire economies, the first thing that would cross a lender’s mind when his borrower got in trouble is whether he was worth more dead or alive. Normally, the answer is “alive” and restructurings and reschedulings were the norm. Now we are told, falsely, that it is a moral duty to pay every debt in full, when these are commercial transactions.

Non-payment has bad consequences for the borrower, so unless they were scamsters, they don’t do it frivolously. But as Kuttner points out, the perverted logic of grinding down borrowers takes the entire economy down with it. It’s ultimately a lose-lose, but having secured political control, it’s going to prove hard to save them and us from their self-destructive behavior.

But, instead of clearly and aggressively supporting additional, major jobs initiatives, substantial (not piecemeal) Main Street stimuli, and correcting the damage inflicted by decades of neoconservative rule we are learning, over the past few days, that our Party has opted to pander to the Milton Friedman school of economic fail.

Indeed, while we’ve just been told by our nation’s leaders that they must be careful what they say for fear of undermining financial markets, when it comes to defunding critical programs that benefit the vast majority of our population on Main Street, that’s fair game?

Let’s visit where this contorted meme is about about to take us in the upcoming election cycle, based upon the most-recently-reported ruminations of our party’s leadership...

Obama Retools 2008 Machine for Tough Run
Jeff Zeleny and Jim Rutenberg
New York Times
June 5, 2011

…a grass-roots movement that had been the envy of Republicans in 2008…has shown severe signs of strain over two years of partisan rancor in Washington and economic struggle across the country.

But for all of the planning, the biggest challenges of the election remain largely out of the organizers’ control, as the bleak jobs report on Friday showed.

So uncertain are the economic indicators that Mr. Obama’s aides say they have not fully settled on an overarching campaign theme for next year.

For now, the president faces a delicate task in arguing that things have improved under his watch when they remain so grim for so many — and that the programs he has put in place are working but need time to show their benefits. With their hopes dashed of substantial improvement in unemployment anytime soon, aides indicated that the theme was likely to be less “morning in America” and more “don’t change horses in midstream.”

Mr. Axelrod said: “We’re not going to be putting up a ‘Mission Accomplished’ sign. Part of the message is going to be we have to see these things through.”

In an interview at his Chicago consulting offices, Mr. Axelrod repeatedly said “stability” for the middle class would be central…



At best, come 17 months from now, our nation’s unemployment rate–the Bureau of Labor Statistics’ “dressed up” U.3 index–will be around eight percent. And, that’s an optimistic projection when you ignore millions more foreclosures, leading to lesser (not greater) demand among this country’s consumer population, and subsequent, increasing income inequality.

Here’s more on Mr. Axelrod’s “stability” meme.

Economy will force shift in Barack Obama’s 2012 strategy
By Carrie Budoff Brown and Glenn Thrush
June 4, 2011   1:46PM

After months of relatively robust job growth, President Barack Obama and his team must now reckon with the reality that the economy probably won’t be on firm ground during the 2012 campaign — and that he must temper some of the Morning-in-America optimism he’d hoped to run on.

The president has been unable to curb the nation’s nine percent unemployment rate, so he will be forced to put the best possible face on a sputtering recovery.

Democratic strategists say that means adopting an ungainly three-pronged political approach: Talking up economic gains since the darkest days of 2008 and 2009, highlighting a modest job-creation agenda blocked by Republicans and making the case that things would be far worse if the GOP were in charge…

Hmmm…where have we heard this before?

…most daunting to the White House is that Obama has few good tools at his disposal to jump-start the economy in the short term.

By ceding the argument to Republicans that the deficit is the problem, Obama helped steer the focus in Washington to cutting government spending, robbing the White House of its ability to argue for more stimulus measures. At the same time, the rise in fuel prices over the past six months has offset efforts late last year to boost consumer spending and job creation.

Scarecrow’s Nightmare: Austan Goolsbee Defends President Romney’s Economic Plan
Sunday June 5, 2011 7:00 am

If I’d been asleep for the last decade and woke up to ABC This Week’s interview of Presidential economic advisor Austan Goolsbee, I would assume that Mitt Romney won the 2008 election, that he was predictably following Republican dogma about how to recover from a severe financial collapse and recession and that intelligent media folks like Christiane Amanpour were realizing those standard GOP policies aren’t working.

Goolsbee correctly told us that a smart economist wouldn’t get overly excited about one month’s jobs and growth numbers but would instead look at the overall trend. Of course what he wouldn’t want to concede is that GDP grew at a meager annual rate of 1.8 percent over the first three months of 2011 and so far was predicted to grow at only 2.8 percent for the next three. And the overall trend for job growth was still not enough to make a serious dent in unemployment unless you believe taking 5-10 years to get back to full employment is okay.

So Goolsbee was in denial from the opening moment because he didn’t have a decent story to tell even in his own framework. When Amanpour asked him what the Administration could or should be doing to improve conditions, he ticked off items you’d expect to hear from a typical GOP Presidential adviser: we’ve got to get the debt under control; we have a White House effort to identify and get rid of governmental regulations that are preventing the private sector from growing the economy; we should pass “free trade” agreements backed by the Chamber of Commerce; and we should leverage limited public dollars to release billions in private funding for investments.

Goolsbee’s bottom line: “It’s now up to the private sector.” That’s exactly what you’d expect from President Romney’s economic adviser…

Scarecrow then pointed to Krugman’s (and others’) comments on the show to put forth the traditional Democratic response, “…business confidence and concerns about taxes and regulations aren’t the problem: business polls repeatedly show businesses aren’t expanding/hiring much because the demand for their products is weak. Demand is weak because the recession and the housing market crash depleted consumers’ wealth and they’re worried about losing their homes and jobs. You don’t need a degree in economics to grasp the logic of that. When private spending is still depressed, only government spending is keeping the economy afloat, and the stimulus is phasing out.”

It’s ironic that when Austan Goolsbee originally joined the Obama administration much was said of his camera presence, with many pundits noting that his media skills were always considered to be better than most.

Even he’s having a problem spinning this.

Then again, it’s nothing a strong Democratic push for a new, substantial round of stimulus on Main Street couldn’t fix.

You don’t need a degree in political science to grasp the logic of THAT!

Originally posted to on Mon Jun 06, 2011 at 03:21 PM PDT.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement and The Democratic Wing of the Democratic Party.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Republished to Dem Wing of Dem Party (11+ / 0-)

    I work with B2B PAC, and all views and opinions in this account are my own.

    by slinkerwink on Mon Jun 06, 2011 at 03:25:06 PM PDT

  •  I keep hearing (14+ / 0-)

    Pundits, economists, and politicians telling me everything will be fine when the housing market comes a couple of years. Of course they never explain how the housing market will come back if nobody has a job.
    Yet both parties continue to toe the Wall Street line that the deficit is the most important problem we face.
    I just don't have any faith in the Democrats nationally anymore. The party that build it's foundations on labor and populism has become little more than the kinder face of the Wall St. bankers.
    State and local govt. can still be effective, but the national parties are both owned.

    •  I agree with your summation, (4+ / 0-)
      Recommended by:
      fat old man, Jimdotz, boofdah, alizard

      and that is why grassroots efforts are the most important political game in towns, cities, counties across this country....the largest single reason that there is a lack of innovation to solve these problems in all of our key issues in this country, is because of lack of choice in those issues....think about what choices you have if you are a family of four and do not make $100,000 plus per year....lower food quality choice, higher energy cost choice, higher banking cost choice, etc., etc.

      The goal is not to bring your adversaries to their knees but to their senses. -- Mahatma Gandhi

      by Mindmover on Mon Jun 06, 2011 at 03:43:28 PM PDT

      [ Parent ]

  •  Republihed to: (6+ / 0-)


  •  A declining economy plus Republican smears (8+ / 0-)

    -- and you know there's going to be a half-dozen "scandals" made up by the Republican attack machine, which media will dutifully repeat (and repeat and repeat) -- is going to throw the election into the air ...


    There's a Democratic, actual, adult-based, Jobs Plan. One for which you can say "See, the Republicans are stopping us. We need your vote in 2012 to make this happen."

    We're sure to see the insipid "but Republicans control the House" argument, put forward like there's no struggle for popular opinion now, and no elections in the future to be shaped.

    Nonetheless, not talking about the Jobs Crisis, when everybody can see there's a Jobs Crisis, is not going to convince people there's no Jobs Crisis. One may think people are stupid, but nobody's so stupid they can't see they are broke.

    Just got off the phone with a friend who told me about how her and her husband, hard-working and honest people, were discussing whether to eat the whole banana today, or to save half for tomorrow. A former ardent Obama supporter she says to me "Let him go be President of India if he thinks globalization is so great!"

    Why the White House and Dem Leadership thinks Trickle Down will work when we've just seen 30 years of Trickle Down disastrously fail escapes me. Like my high school history teacher said, "you can judge a leader by who they pick as advisers." Looks like the President's advisors support Republican ideology when it comes to Economics, War, and Rule of Law.

    Until we break the corporate virtual monopoly on what we hear and see, we keep losing, don't matter what we do.

    by Jim P on Mon Jun 06, 2011 at 05:45:17 PM PDT

    •  qwerty (0+ / 0-)

      'A former ardent Obama supporter she says to me "Let him go be President of India if he thinks globalization is so great!"'

      My response to you in another thread:

      •  Man, please stop dogging me about India (1+ / 0-)
        Recommended by:

        every single time I talk about the devastation my industry (and my friends and social network and I myself) have experienced from jobs being shipped to India.

        Now and then, okay. But every single time?

        C'mon give me some respect. Your other two enormously long comments totally stomped on my point, which I labored a half-hour to write. India was just in passing.

        Please, stop doing this to me.

        Thank you.

        Until we break the corporate virtual monopoly on what we hear and see, we keep losing, don't matter what we do.

        by Jim P on Tue Jun 07, 2011 at 01:26:03 AM PDT

        [ Parent ]

        •  qwerty (0+ / 0-)

          Please allow me to begin my response by saying that I consider you to be a kind-hearted and well-intentioned person. Next, I do not track or search your comments (through your username, for example), and so I not trying to "dog" you as such. Your comments come up through a generic search that I do.

          I can also tell you with certitude that unthoughful anti-India comments and political demagoguery by some politicians (people read such comments and form their own imaginary assumptions and mythlogies around them) are indeed fueling very real and wide spread strains of Indophobia, which is unjustified as well as untoward. Preventing such untoward spread of Indophobia is my primary motivation for looking up what is being said about India and to offer facts pertaining to the same, and all of this "activism" (Anti-anti-India activism, if you will :)) on my part is a purely personal initiative, i.e. noone pays me or tells me to do what I do.

          'devastation my industry (and my friends and social network and I myself) have experienced from jobs being shipped to India.'

          I'd like to suggest you to write a well-documented and thoughtful diary about this specific situation about your industry that you mention, keeping in mind the macroscopic trade facts that I have been conveying to you in my responses. If you do write one and prompt me about it, I promise to read and give well-considered response to it (and perhaps some suggestions as well, if I can think of any, for improving the situation for you and your near and dear.)

          What is not conscientious on anyone's part, however, is to make, wittingly or unwittingly, a villain and "public enemy" out of India, a dirt poor country (with one of the lowest per-capita GDPs in the world) whose people are struggling to lift themselves out of abject poverty (induced upon them, as it turns out, primarily through colonial era exploitation and thuggery; the exploitation of reasources and labor from the so-called "third world" countries during the colonial times was indeed how the global capitalist system came to exist.)

          Especially when the trade relationship between the two countries is relatively quite balanced, as is the case between the US and India, there isn't much to complain about from a macroscopic economic perspective. When trade is balanced, it means that our exports to the country in question are roughly to the same tune as our imports from that country, and those exports create American jobs and fuel growth here. In fact, when engaged in balanced trade with a country with a higher current growth rate than ours, it can be shown that it helps increase the rate of growth of the our economy (though, certain other ingredients such as innovation and low inequality rate are also needed for this to work well). There is absolutely no doubt that not engaging in (balanced) trade with developing countries such as India would be highly detrimental to the economic future of the United States.

          Please keep in mind also that, in the general context of offshore outsourcing, there are many other developing countries that are the destinations of such outsourcing. In fact, as you may have seen me mention before, the Philippines, a country about a tenth of India's population, has recently overtaken India as the leading destination of outsourced services and call centers. Based on the information there, one can estimate that call centers in particular amount to a small $3-4 billion (and on an apparently declining trend, with countries like the Philippines, Sri Lanka other Asian, Eurasian and eastern European countries attracting such business) of revenues that go from the US to India.

          In all, US imported $43.2 billion worth of goods and services from India in 2010 (1.85% of US' total imports of $2.33 trillion), and exported $30 billion (1.63% of US' total exports of $1.834 trillion), which are both tiny drops in the bucket for a 14.7 trillion dollar US economy last year. The US does indeed have a huge recurring trade deficits problem with China ($263 billion US trade deficit with China in 2010), which does need to be rectified (not through political demogoguery or direting animosity towards the nation of China, of fears towards the Chinese of Chinese-American people, but via strong presidential level leadrship, which, unfortunately, no President or serious presidential prospect seems willing to provide), but India is one of the better trading partners the US has, as the data shows. Please see my trade data comment here:

          Finally, here is the perspective that I come from: I'd like to see a world where any kid born anywhere on this planet has a chance to receive a good education and have an opportunity to make something out of his or her life, provided that he or she is willing to put the necessary effort towards it.

  •  Who is this Axelrod guy? (0+ / 0-)
  •  Austan Goolsbee is just a pale reflection of... (2+ / 0-)
    Recommended by:
    emal, alizard

    Bob Rubin, not tough or smart enough to leverage his position into a fat ticket to Wall Street. I am so sick of the parade of Obama administration economic "brain trusters" that are so steeped in their own views that actual people are completely irrelevant to economics that I'm ready to bust. Jobs, good paying jobs, mortgage relief, an effective program of mortgage relief and some statement of support for actual Democratic ideals, not this recycled Clinton era "New Economy" garbage that consolidated corporate wealth and power, while blaming unemployment and wage disparity on skills mismatches and changing technology. It is not true now, it was not true then and this view continues to impoverish the majority of the American people while concentrating wealth and power in a smaller and smaller segment of America.

    Our plight is not a result of the necessary functioning of the economy, it is a result of the policy of the government over the past thirty years and the acceptance of the "Free Market," "privatize the inefficient government," memes of a discredited and unpredictive "Washington Consensus" set of policies championed by Republicans and "New Democrats" alike, because actaully governing in the interest of the American people, apparently, is too hard...

    "Intelligence is quickness in seeing things as they are..." George Santayana

    by KJG52 on Mon Jun 06, 2011 at 06:37:53 PM PDT

    •  Re: Goolsbee on the Sunday talk show (1+ / 0-)
      Recommended by:

      It will be interesting to learn -- if we ever do -- if Goolsbee's mimicry of the administration's Republican-like talking points made him sick of the job and of his role in the administration. Or if he just wasn't convincing enough for them...

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site