The liberal understanding of the economy and its problems has been, in recent months and years, superior to the conservative understanding of the country and its problems. And this has only sharpened in recent weeks, as the Republican Party has spun off into the Gamma Quadrant with laughable theories about ACORN and Fannie Mae and Freddie Mac and the Community Reinvestment Act of 1977. Their argument isn’t wrong in the sense that it’s a serious engagement with the situation that happens to be less empirically sound than competing theories. It’s just nonsense. And this isn’t a time when we can afford governance powered by nonsense. We need governance by people who understood the magnitude and nature of the problem, and have some idea how to go forward fixing it.
And as Robert Reich put things last week:
For years, regardless of the business cycle, American consumers were the Energizer Bunnies of the world economy. Their spending kept it going. But now the Energizer Bunnies have turned into scared rabbits, and they’re going back into their holes.
Yes, we need better regulation of Wall Street in order to avoid the sort of bubbles and distrust that have generated a credit crisis. But even more than that, we need to get money back into the pockets of average American consumers — including major investments in infrastructure, affordable health care, and a more progressive tax code.
Easier said than done, of course, but when you hear Republicans blither on about balanced budgets and lowering capital gains taxes it’s kind of hard not to simply burst out laughing. Yeah, let’s suck a few trillion more out of the economy and see what happens.
As it turns out, the “Old Europe” types the Bushies were so happy to excoriate a few years ago seem to be the only ones with half a clue about how to start fixing the economic mess. Talk about irony.
Meanwhile the war continues. Here’s a short video of American soldiers in a firefight for you wingnuts to wack off to.
http://www.salon.com/news/feat.....firevideo/
And if that isn’t enough for you check out these photos at:
http://www.unembedded.net/main.php
The lead editorial in the Wall Street Journal is more ACORN smear salesmanship.
First they start off saying the ACORN is Obama’s kind of outfit.
Let’s seee… not too far in they they repeat the smear that ACORN is in part responsible for the mortgage meltdown. Sheesh am I reading IBD?
Then they say ACORN received 16 million dollars of housing money from the Federal government according to the “Employment Policies Institute”. WTF is that? Sound “credible”?
NOT.
http://www.sourcewatch.org/ind....._Institute
Next they go down the list of registration missteps – many of which were reported to local law enforcement by ACORN itself!
Lastly they do a guilt-by-association job on Obama no matter how tenuous the associations.
Been years since I’ve steeled myself to read a lead WSJ editorial. I have to go take a shower now and pop something for nausea.
The one thing that concerns me is that both Dem and Rep candidates/politicians are still talking about tax cuts and more spending. This aspect of Reaganomics is still very much with us.
Since the crisis began I’ve been wasting time watching cable news, and once in a while the question is asked, “So where is all the money for this [bailout, bank stock purchase, economic stimulus package, tax cut] going to come from?”
Regardless of who is being interviewed, the question is dodged and is left unanswered.
When is the taboo against raising taxes and cutting spending going to end? There will be hell to pay for the last 20 years, and I’d rather start paying now than paying much later.
Still further skewering of the the whole Fannie Mae/Freddie Mac/CRA canard regarding the current credit crisis can be found here.
I’ve been posting links to stuff like this for weeks, but we still see folks from the right blaming this whole mess on Democratic policies. The argument is fatuous on two fronts: 1) Bush had the same policies regarding the “ownership society,” and 2) the argument’s basis is ignorance, not fact.
Has no one else noticed that none of the articles that attempt to blame the current crisis on CRA/Fannie Mae/Freddie Mac ever cite any relevant data in support of the claim?
Gee whiz, Roger…it sounds like Reich was speaking about you!
Nonsense? If you want to see nonsense just click over to your nearest rightie blog. Check out this gem.
@2 What do you expect from Rupert Murdoch?
@5 Well, you missed a couple of nuances. Reich says consumers are scared; I say they’re broke. Big difference. Reich also implies that if consumers merely stopped holing up they could energize the economy again. I say consumers are holed up; they’re tapped out. Reich and I do seem to agree that putting money in consumers’ pockets is the solution, but he doesn’t (explicitly, at least) acknowledge that the underlying problem is wage erosion, and that unless we restore labor’s share of GDP a decline in consumer spending will be both structural and permanent.
#8. I agree. I think that it will finally be realized that the bulk of consumers are tapped out. They don’t have any more to spend or borrow. They are done. It’s going to take a long long time for the debt repayments to work through the economy. Wished the government would buy the little guy’s toxic debts. Must be nice.
It’s like this: Real wages have been flat since 1970, and labor’s share of GDP has declined from over 60% to under 50%. Meanwhile, the consumer spending portion of GDP grew to 70%.
How was that possible? For 35 years, consumers increased their consumption despite languishing wage income by spending their savings and borrowing against home equity and credit cards.
That was unsustainable and we’ve now reached the limits of consumer spending — hit the wall, so to speak.
Lenders are now demanding that consumers both pay higher interest rates and pay back the money they’ve borrowed. That will hit consumer spending with a double whammy — not only must consumers ratchet back their debt-fueled spending, but must ratchet back even further to pay higher interest bills and repay debt.
Rabbits who spent the last 25 years paying off car loans, making mortgage prepayments, and stashing cash for the day when stocks would become cheap will make out very well in the coming depression. Indebted humans, not so well.
Yesterday’s stock market rally was investor response to signs that the world’s governments are now working together and will do whatever is necessary to prevent a 1930s-type depression. But it’s not the market bottom, my friends. It’s only a temporary reprise.
Why? Because consumer spending must slide downhill from here, and corporate profits will slide with it. It won’t be a sudden fall off a cliff, but rather a long and low-speed skid down a slippery slope that will last for years. Believe me, there’s plenty of cash sitting on the sidelines that can easily go into stocks whenever a cow or two gets the herd moving — there’s a graph in the current Barron’s of just how much idle cash there is. Tremendous amounts. But it’s herd money, fool’s money, waiting to be thrown away.
Why? Because stock prices ultimately are tied to profits, and profits are ultimately tied to sales, and sales ultimately are tied to incomes, and incomes will go down — not up — when the only things going up are inflation and unemployment.
We need higher wages. We need more and stronger unions. We need the asset owning class to settle for less of GDP. That’s the only cure. Our economy doesn’t benefit from a few people making over a billion dollars a year while everyone else makes less. You’ve got to understand that transferring wealth from Labor to Owners doesn’t create wealth, it simply redistributes it. You’ve got to understand that wealth is created only by growth, and redistributing income by ripping off utility consumers and beating down wages doesn’t produce growth, it produces a Zero Sum economy in which some people get more by taking it from other people who necessarily end up with less, and that’s the kind of economy we’ve become. You’ve got to understand that if we don’t change that everyone will end up with less in the end. That’s what the financial markets are trying to tell you.
typo @8: “I say consumers are holed up” should read “I say consumers aren’t holed up”
It’s been a long time since a conservative economist won a Nobel Prize. A liberal economist won the Nobel Prize this week. Anyone see a trend here? It means Wingnut Whack-O-Nomics isn’t respectable anymore.
@8,10
Pretty much nailed it.
Roger,
Nice screed, though I’m a bit biased. I said pretty much the same thing over in the “Friedman is Dead” thread.
I’ve always been a fan of profit-sharing. What do you think of tax breaks to firms that employ some form of profit sharing with labor?
Yet there are still conservatives flooding the airwaves with their ideas and the mainstream Dems are not offering clear explanations about what has happened and how we must proceed to avoid a greater disaster.
@14 I really don’t like attempts at economic engineering via tax breaks because they create market distortions. And also, they’re unfair. The specific tax break you mention would penalize workers whose companies “share profits” by raising wages instead of instituting a “profit sharing” scheme, even though they have no choice in how their employer distributes the money. I’m a fan of a flat-rate income tax. For exmaple, I think we should eliminate estate taxes and tax inheritances the same as wages.
@ 16
First of all, anything the government does to encourage any kind of economic change creates market distortions of some form or another. Arguable, regulation is a market distortion. Not all market distortions are bad.
Second, not all taxes have the same kind of market distortion. In a comment on a recent thread, I showed how the market distortion from our B&O tax differs from a straight tax on business profits. One affects price, while the other does not.
Lastly, I’m not sure if you’re arguing against taxes per se or if you think there’s a basic problem with the concept of profit sharing. If the former, do you think there are other ways to encourage firms to enter into profit sharing agreements? It’s not at all clear to me, for example, that exempting any profit distributions to labor from corporate taxes is going to have the negative impacts you describe.
If the latter, I’m not sure there’s much to be gained by fostering the traditional adversarial relationship between capital and labor. The two depend on each other. Policies and practices should reflect that interdependence, no?