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in Washington Wall Street rules « Previous | |Next »
July 23, 2012

In Getting Away with It in the New York Review of Books Paul Krugman and Robin Wells explain why there has been no second New Deal and why the policy response to the prolonged economic slump has been so inadequate.

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Steve Bell

Krugman and Wells say that compared to the New Deal of the 1930s:

neither the Democrats nor the Republicans are what once they were. Coming into the Obama presidency, much of the Democratic Party was close to, one might almost say captured by, the very financial interests that brought on the crisis; and as the Booker and Clinton incidents showed, some of the party still is. Meanwhile, Republicans have become extremists in a way they weren’t three generations ago; contrast the total opposition Obama has faced on economic issues with the fact that most Republicans in Congress voted for, not against, FDR’s crowning achievement, the Social Security Act of 1935.

The consequence of being captured by Wall St is that the Obama administration saw wits primary response to the b global financial crisis as one of restoring financial market confidence, which meant doing nothing that might upset Wall Street. There was no discussion of blame, no hint that the bankers had done a bad thing by putting the economy in such a predicament. That would, after all, undermine confidence.

Democrats in general, and Obama in particular, were too close to Wall Street to deal effectively with a crisis that Wall Street had created. Wall Street received a lavish bailout, with remarkably few strings attached, while workers and homeowners were let down by radically underpowered plans for stimulus and debt relief.

With respect to Republicans haven become extremists in a way they weren’t three generations ago Krugman and Wells say that one reason for the Republican intransigence is ideology:
for three decades before the financial crisis American politics and policy had been increasingly dominated by laissez-faire ideology, by the belief that markets—and financial markets in particular—should be allowed to run free. Then came the inevitable crash. But far from demanding a return to stronger regulation, much of the American electorate turned to the view that the crisis was caused by too much government intervention.

Secondly, the Republican Partyat has been radicalized not by a struggle over resources—tax rates on the wealthy are lower than they have been in generations—but by fear of losing its political grip as the nation changes from the immigrants and their children changing the face of the American electorate. The GOP is gambling that it can continue to win as a white party despite the growing strength of the minority ethnic vote, and it has adopted a strategy of radical, no-holds-barred confrontation over everything from immigration policy to taxes and, of course, economic stimulus, some part of which would be paid to minorities.

| Posted by Gary Sauer-Thompson at 10:01 AM | | Comments (1)
Comments

Comments

You can see the intransigence of the Right in Australia with the opposition of the LIberal states--WA, Queensland, Victoria, NSW---to the national disability insurance scheme that would provide lifelong support to permanently disabled people.

Victoria was being called on to provide just $10 million a year for four years; NSW refused to contribute an extra $70 million over four years to host a trial. Queensland remains implacably opposed to contributing any funding, even though this state spends less on disability services, on a per capita basis, than any other state.

They are playing politics--seeking to deepen the political divide and increase the political partisanship.