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US: showdowns and shutdowns « Previous | |Next »
March 7, 2011

Robert Reich says that In the US there are currently around 13.7 million unemployed, the number working part time who’d rather be working full time is 8.3 million and the new jobs pay significantly lower wages with lesser benefits than the jobs lost.

Rich's argument is that though the proximate cause of America’s economic plunge was Wall Street’s excesses leading up to the crash of 2008, its underlying cause is so much income and wealth have been going to the very top that the vast majority no longer has the purchasing power to lift the economy out of its doldrums.

Paul Krugman on the Republican's job-killing short-run deficit reduction act gives the broader context of the policy response:

The bubble economy of the Bush years left many Americans with too much debt; once the bubble burst, consumers were forced to cut back, and it was inevitably going to take them time to repair their finances. And business investment was bound to be depressed, too. Why add to capacity when consumer demand is weak and you aren’t using the factories and office buildings you have?The only way we could have avoided a prolonged slump would have been for government spending to take up the slack. But that didn’t happen: growth in total government spending actually slowed after the recession hit, as an underpowered federal stimulus was swamped by cuts at the state and local level.

The years of high unemployment and inadequate growth are seeing the emergence of some economic recovery.

Krugman says that the clear and present danger to recovery:

comes from politics — specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more. Quite aside from their negative long-run consequences, these cuts would lead, directly and indirectly, to the elimination of hundreds of thousands of jobs...Over the next few weeks, House Republicans will try to blackmail the Obama administration into accepting their proposed spending cuts, using the threat of a government shutdown. They’ll claim that those cuts would be good for America in both the short term and the long term.

The Republicans contend that the direct job-destroying effects of their proposals would be more than offset by a rise in business confidence. Their message is that bloated government is responsible for the lousy economy that most people continue to experience. Cut the bloat and jobs and wages will return.

Washington is currently headed for government shutdown with the House Republicans raising the alarm alarm over deficit spending and simultaneously squeezing popular middle-class programs. They say that they won’t budge on the $61 billion cut they pushed through last week. The Republican Tea Party Right wants total Democratic capitulation and they equate compromise with surrender.

The Obama administration tactic appears to give away the store before real bargaining even begins. The administration is proposing $50 billion in spending cuts -- halfway to the tea party's policy -- as his opening offer. These proposed cuts are in in programs the poor and working class depend on – assistance with home heating, community services, college loans, and the like.

The administration has yet to substantially challenge the Republican narrative on cutting spending now -- at the beginning of a fragile recovery -- will cost hundreds of thousands of jobs, slow growth, and fail to reduce red ink.

| Posted by Gary Sauer-Thompson at 1:51 PM | | Comments (2)


Robert Reich says that:

The Republican strategy is to split the vast middle and working class – pitting unionized workers against non-unionized, public-sector workers against non-public, older workers within sight of Medicare and Social Security against younger workers who don’t believe these programs will be there for them, and the poor against the working middle class.By splitting working America along these lines, Republicans want Americans to believe that we can no longer afford to do what we need to do as a nation.

The strategy has three parts.The first is being played out in the budget battle in Washington.

The second part of the Republican strategy is being played out on the state level where public employees are being blamed for state budget crises.

The third part of the Republican strategy is being played out in the Supreme Court to o bending the Constitution to enlarge and entrench the political power of the wealthy and corporations.

Paul Krugman spells out the second part of the Republican strategy is being played out on the state level where public employees are being blamed for state budget crises.

He says in reference to pay squeeze for public sector in Wisconsin and Governor King's bill that would strip public employees of their right to collectively bargain:

the fiscal crisis in Wisconsin, as in other states, was largely caused by the increasing power of America’s oligarchy. After all, it was superwealthy players, not the general public, who pushed for financial deregulation and thereby set the stage for the economic crisis of 2008-9, a crisis whose aftermath is the main reason for the current budget crunch. And now the political right is trying to exploit that very crisis, using it to remove one of the few remaining checks on oligarchic influence.

We need to have institutions that can act as counterweights to the power of big money. And unions are among the most important of these institutions.

More here.