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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

US: a double dip « Previous | |Next »
September 24, 2011

Paul Krugman's argument about the “fiscalization” of economic discourse in America is one that refers to the way in which a premature focus on budget deficits--ie., slashing spending and reducing deficits so as to restore confidence and drive economic revival----has turned Washington’s policy attention away from the ongoing jobs disaster.

Growth-oriented policies--not trickle down economics--- are what is required to address the issue of long-term unemployment. The US economy is in crisis. People are hurting. So government must act, and it needs to act quickly.

As Robert Reich puts it this way:

When consumers can’t spend and businesses won’t spend without additional consumers, government must be the spender of last resort. Juicing the economy back to health ... will require at least $700 billion in additional federal spending this year and next. But this magnitude of additional spending isn’t feasible in the face of Tea Party Republican intransigence. Hell, Republicans won’t even spend additional money on flood and hurricane relief. The Tea Party obsession about the federal deficit and the size of the government is prevailing.

The Republicans are determined to keep the US economy in the doldrums. Their goal is to get Obama out of the White House and that’s more likely to happen if the economy is in recession come Election Day 2012. They'll trash the political and economic institutions--the government is the problem; make the whole process of governing bitterly partisan and rancorous --- to do it.

Since monetary policy will probably not ride to the rescue--the Republicans have effectively put an end to fiscal stimulus, and now hope to derail monetary stimulus as well. So poverty and unemployment will almost surely increase, wages will stagnate or continue to fall, and inequality will widen and Wall Street will win the battle against regulation.

| Posted by Gary Sauer-Thompson at 3:56 PM | | Comments (10)


"Their goal is to get Obama out of the White House..."

That's partly right, but I think the major goal is to undo the remains of the New Deal and vitiate the whole concept of Public Interest. There is a class war going on in the US, and it's not a war waged by the poor against the rich. Here's Prof. Krugman again:

"Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat.

"Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like."

I don't think this is restricted to the USA. Post-industrialised countries are in decline and their owners of capital are having mixed luck breaking into the newly emerging growth economies. Endless growth meant capital was prepared to tolerate a reasonably large public sector engaging in progressive activities like health and education. Stagnation and decline mean the only way for the bastards to get richer is to take it off someone else, and who better than the middle class, brainwashed into believing that taxes are baaaad and governments should never ever borrow any money? Thus the transparently self-serving conservative mantra that tax cuts and cutting government spending are the correct response to all known problems of public policy.

It's not really class warfare in the sense they want to hurt anyone personally, or achieve some ideological objective. They just want our money. Kevin Rudd was prepared to stand up to them, which caused his exile to foreign affairs. Julia Gillard is much more amenable to the agenda, just like Barack Obama.

Of course history suggests that in due course the masses will get a bit edgy about being exploited and start being violent, but the agents of capital never seem to understand that. Maybe they don't care because they don't believe it will happen in their lifetimes, and most of them are probably correct. However I don't think I'd care to be a rich American in about 50 years time ... the place will probably be decidedly unstable (and NOT because it's been taken over by Muslims).

I agree with Ken_L that it's not strictly limited to the US, but the US has taken the lead in support of right-wing repression in a manner curiously reminiscent of the role of Austria-Hungary back in the days of the Holy Alliance.

The policy of Metternich was to intervene freely to prevent liberal reforms in post-Napoleonic Europe, just as the US intervenes freely to place parties and individuals loyal to themselves in power everywhere within their extensive reach. Any criticism of US aims or methods is met with almost hysterical abuse and denial, regardless of fact.

And US objectives are very clearly seen now as anti-liberal, repressive, oligarchic, racist and militarist. The US sets the pace, and its foreign sycophants obediently follow.

Ken_L: "Stagnation and decline mean the only way for the bastards to get richer is to take it off someone else..."

I think that's got a lot of truth in it, and is in line with the historical politics of the eras of much lower growth - which is really any era before our own.

It doesn't need to be that way, though. I'm not that much of an economic determinist. When I remember the plans and hopes of those who foresaw "development without growth" (eg. the Brundtland Report) I'm reminded of a comment made about the failed revolutions of 1848 - "a historical turning point that failed to turn". Maybe that's how the late 20th/early 21st Centuries will be described in the future.

Here is an interesting remark on these issues from a US economics blog: "It's distribution, not production that has failed us over the last 30 or 40 years. We produce far more than we ever have, and we will continue to increase our ability to squeeze more and more out of the resources we have. We have the ability to produce enough stuff. But the distribution of the things we produce has been tilted toward the top. Instead of wages rising with productivity as our textbooks say they should, wages have stagnated and the rewards have gone elsewhere. Thus, while the pessimism of the past was about production not being able to keep up with population -- many classical economists looked forward to a long-run outcome of a dismal, stationary state with most people struggling at subsistence wages -- the pessimism of the present is driven largely by a failure of distribution."

Then again a substantial majority of the global population lives in countries where life just keeps getting better and better, albeit from a pretty awful base. Fortunately Australia seems likely to be swept into the Asian economic river, despite the desperate efforts of most of the ruling class to maintain that we are some kind of missionary outpost of 'Western values'. In 50 years Australians will most likely to be able to laugh at the plight of those poor wretches in the USA and UK.

Mind you those same Australians of the future will not have much in common with today's stereotypical 'dinkum Aussie', and they are likely to feel about Tony Abbott and Julia Gillard much the same way most people feel today about Bert Evatt and Billy Snedden.

It's very interesting to watch the ex-colonies of the world emerge from their colonial heritages and develop their own individual characters. In my prolonged stays in the Philippines it's quite striking to see how quickly the US cultural influence is evaporating, much to the resentful disgust of the small American expat enclave. And of course unless one knew the history of Singapore, one would never guess it used to be a British possession.

Australia started late because the indigenous base was practically obliterated, but we are getting there. When we finally get a government that realises the alleged 'special relationship' with Washington is bullshit and fantasy, as must inevitably happen sooner or later, the development of a sense of cultural (and economic) independence within an Asia-Pacific frame can only accelerate.

There is the emergence of the suburban poor in the US along with the urban poor.

Ken says: "
I don't think this is restricted to the USA. Post-industrialised countries are in decline and their owners of capital are having mixed luck breaking into the newly emerging growth economies."

A good example is solar power. Whils the Republicans are determined to trash it the Chinese are investing big time.

What has happened in the US since the 1980s is the triumph of Wall Street and their money flows through Congress as campaign funds by industry lobbyists who then require the politicians to pass legislation favorable to them. Wall Street's hegemony diminished the country’s productivity by directing capital on the basis of financial chicanery, outrageous compensation packages and bubble-infected stock price valuations.

Big banks are very powerful, and they destroy politicians they don’t like.They operate through front groups (media) to smear those politicians calling for the reform (regulation) of an outraged Wall Street.

Financial deregulation was really the ceding of governments’ responsibility to set the rules, handing it over to traders, who set their own rules. To justify this they demonize the government.

Wall Street's mantra is that government is the “problem”. Business good, government bad. Ergo, government should become more like business. So we have the market state. Free markets are the solution to practically every problem – health care, product safety, bank regulation, financial speculation and so on--because unchecked self-interest furthers the common good.

This is a slippery piece of rhetoric because surely it is “bad government" that is the problem, not governments per se.

The financial institutions are dictating terms to indebted governments.These are policies that benefit the profit margins of their banks whilst the working poor are made to suffer.

Wall Street's mantra is that government is the “problem”....?

Until they need the govt to bail them out!

Hypocrisy much?