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May 29, 2011
Since the global financial crisis the Obama administration has been good to Wall Street and big business. It bailed out the Street. It saved GM, Chrysler, and AIG. And most government spending improves the profits of big businesses – military contractors, big agriculture, giant health-care insurers, Big Pharma, large construction companies. The White House are holding their breath, hoping the recovery catches fire next year before Election Day.
In Making Things in America in the New York Times Paul Krugman says that manufacturing is one of the bright spots of a generally disappointing recovery:
America’s industrial heartland is now leading the economic recovery.... I don’t want to suggest that everything is wonderful about U.S. manufacturing. So far, the job gains are modest, and many new manufacturing jobs don’t offer good pay or benefits. The manufacturing revival isn’t going to make health reform unnecessary or obviate the need for a strong social safety net.Still, better to have those jobs than none at all.
Krugman says that what is primarily driving the turnaround in the US's manufacturing trade is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage.
Krugman's 'generally disappointing recovery' refers to the combination of high unemployment and high home foreclosures that assures a deeply depressed economy. The US economy, like so many others, is caught in serious stagnation.
Richard Wolff observes:
In reality, the US is fast becoming more and more like so many countries where a rich, cosmopolitan elite occupies major cities with a vast hinterland of people struggling to make ends meet. The vaunted US "middle class" – so celebrated after the second world war even as it slowly shrank – is now fast evaporating, as the economic crisis and the government's "austerity" response both favour the top 10% of the population at the expense of everyone else.
It isn't looking good for many Americans at the moment. The technocrats at the Federal Reserve are running the US economy because the political arms of government—Congress and the Administration—largely abdicated responsibility for managing the economy to the Federal Reserve.
This has basically worked out to the benefit of the rich (people with lots of assets) as opposed to the poor (people with few or no assets). The Federal Reserve's economic policy is essentially a tradeoff between inflation and unemployment, and it gives greater priority to the former over the latter.
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The original rescue of Wall Street was done under the Bush Administration by Henry Paulson, to save his friends in Wall Street. And they did save his friends, and in so doing they promoted the consolidation of investment banks and made the problem worse. Paulson didn’t recognize these banks as a problem---too big to fail.
Now Wall Street campaigns for minimal government. Minimal government would not require many taxes as it would not have large expenditures; it would not interfere in labor markets, letting individual workers deal with large business firms as ordinary people deal with the grocery store. This is not an attractive place to live for many people.
It's rule by bankers. American politics is being run for the benefit of bankers not the middle or working class. The broad principle is that governments should run their economies on behalf of banks and bondholders.
They should bail out at least the senior creditors of banks that fail (that is, the big institutional investors and gamblers) and pay these debts and public debts by selling off enterprises and shifting the tax burden onto labor. To balance their budgets they are to cut back spending programs, lower public employment and wages, and charge more for public services from medical care to education.