I have a gnawing feeling that the GOP is purposefully leading us into another Great Depression.
Regarding the financial crisis, maybe I’ve just been reading all the wrong stuff. Until now, I thought I had managed to find answers to the most puzzling questions in and around our economic slow-motion crash. A few continue to haunt me though.
For instance, if the crash of 2008was preceded by an era of supposedly unprecedented prosperity, how come most of the people I know weren’t earning much during that period?
And if deregulation of financial services was supposed to have made us all better off, why did most of us have to live off credit to keep up? Now that all of that strategy has gone wrong, and everyone agrees we’re in the worst crisis since the Great Depression, why are we following the opposite of the lessons we learned in the 1930s?
President Obama is the only world leader who has attempted a Keynesian stimulus program and it worked quite well compared to Europe. So why do most other western leaders still insist the only way out is to tighten our belts and pay off our debts, when that clearly is crushing the euro zone?
And how come the bankers, credit agencies and bond traders are still treated with impunity when they are the ones who got us into this mess?
These mysteries were beginning to make me feel as if I must be going nutty. But after reading Paul Krugman’s new book, I feel better about myself, but worse because nobody seems to be listening to him, and certainly not to me. End This Depression Now! provides a comprehensive sequence of events of how we have ended up doing the opposite of what logic and history tell us we must do to get out of this crisis.
And there are lots of things the conservatives say that sound very wise and sensible…to the average American who can only equate their own checkbooks to the U.S. economy. But it’s all upside-down; it’s all wrong. Yet the power of their orthodoxy – even when it’s failing – is quite powerful because so many in the media are repeating it.
Joe Scarborough, a former Florida representative who had to leave office because of the death of one of his interns, Lori Klausutis, a 28-year-old office worker for Rep. Joe Scarborough (R-Fl), which was never investigated, leads off the day on supposed “liberal-leaning” MSNBC with a daily diatribe against any and everything Obama.
Scarborough surrounds himself with “yes-men”(and his token liberal Mika Brzeznski ) whom he will literally shout-down if she dares to try and offer a modicum of impartiality to the show. He even had an incident, on air, when Mark Halperin, Senior “Political Analyst for TIME Magazine” actually called President Obama a “dick”, which Mr. Scarborough found hilarious. Another of Mr. Scarborough’s roundtable favorites, Pat Buchanan, was so blatantly racist he was eventually fired.
With these types of people on “Liberal” MSNBC, you can only imagine the “fair and balanced” treatment the rest of the networks in America provide. Meet the Press, and it’s host, the shamefully Conservative David Gregory, have utterly destroyed the fine reputation that the late Tim Russert had spent years honing for NBC.
These Very Serious People present economics as a morality play, in which debt is a sin, and we have all sinned, so now we must all pay the price by tightening our belts together. They tell us the crisis will take a long time to resolve, and must inevitably be painful. All of this, according to Krugman, is the opposite of the truth.
Austerity is a self-imposed collective punishment that is not just unnecessary, but won’t work, and never has worked IN HISTORY when used to bring a down cycle back to a period of growth. “Ending this depression,” he writes, “should be, could be, almost incredibly easy. So why aren’t we doing it?”
Despite the fact that Republican Presidents have run up more debt that Democrat Presidents, when Democrats inhabit the White House “debt” becomes the boogey-man and the Democrats are labled “Tax and Spend Liberals”.
Debt in itself is not a terrible thing, just ask Ronald Reagan or Dick Cheney, who both proclaimed that “Deficits don’t matter”…the end of that sentence muttered under their breath was surely, “unless Democrats are in the White House”.
The idea so hard to get across to Americans is that what’s true for an individual is not true for society as a whole. The analogy between a household budget and a national economy is seductive, because it’s very easy for people to relate to, and it makes some sense when we’re not in the grip of a macro-economic crisis.
But when we are, then individually rational behavior adds up to a collectively disastrous result. It ends up that each individual trying to improve his or her position has the collective effect of making everybody worse off. And that, in a nutshell, is the story of our times.
At these moments someone has to start spending and it is the government who is the “spender of last resort”. But we’re endlessly being told by the “media” and conservatives that we have to pay off this debt because servicing the interest is ruinous, and the bond markets will destroy us unless we’re seen to be tackling the deficit.
Here’s a little secret a conservative will only tell you when they run the White House… the markets could care less how and when we reduce the deficit, as long as we can pay our way. Which, by the way, is exactly what Republicans threatened last summer and resulted in a credit downgrade for the U.S. And they plan to do it again very shortly.
That’s the interesting thing. The actual verdict of the markets, for countries that have their own currencies, has been that they don’t really care at all in terms of what you’re doing in short-run policy.
In the years following the Great Depression, government imposed regulatory rules upon the banking system to ensure that we could never again become indebted enough to make us vulnerable to a crisis. But if it’s been a long time since the last major economic crisis, people get careless about debt; they forget the risks. Bankers go to politicians and say: ‘We don’t need these pesky regulations,’ and the politicians say: ‘You’re right – nothing bad has happened for a while.’
That process began in earnest in 1980, under President Ronald Reagan (see: Conservatism and Great Depression 2.0, Austerity: The Real Euro Crisis Begins in Spain, and The GOP Assault on Our Economy Continues-Why the GOP Hates Regulations). The modus operandi of the GOP since then has been to roll back every single safeguard put in place after the Great Depression to prevent a repeat of that terrible time.
If we divide the period between the second world war and 2008 into two halves, “the first half is a really dramatic improvement to living standards, and the second half is not.
Why would economists claim ordinary people were getting much richer if they weren’t?
The obvious answer is that the influence of the top 0.01%’s mindboggling wealth didn’t stop at finance professors. Their mansions and yachts and luxury lifestyles created “expenditure cascades”, whereby, “if you’re a little bit down the income distribution from there, you’re going to feel some compulsion to match some of that too. And then, in turn, the people below you can feel some compulsion too.”
There were early warning signs, such as the savings and loan crisis of the late 1980s, that should have alerted politicians to the dangers of financial deregulation, moral hazard and subsequent spiraling debt( see: Stop the GOP Assault on the U.S. Economic Future).
Largely Republican economists whose work had become infected by partisanship and political orientation “triumphantly” announced the death of Keynesianism. Now, as they are faced with the catastrophic collapse of their theories, political bias and professional pride are what’s stopping them admitting they were wrong.
These same Republican economists cite the woefully limited impact of Obama’s almost $800bn stimulus package as proof that they are still right. Of course, the only thing wrong was it wasn’t enough.
And the EXACT SAME THING HAPPENED DURING THE GREAT DEPRESSION!
Almost half went on tax cuts, and most of the remaining $500bn went on unemployment benefits, food stamps and so on. Actual infrastructure spending was only approx. $100bn. So if your image of the stimulus program was: “We’re going to go out there and build lots of bridges”, that never happened.
Since the crash, I admit that I’d like to actually win for once, instead of being vindicated by the disaster that’s coming – as I and some others have predicted. I’d much rather see my arguments about preventing the disaster taken into account instead.
The likelihood of that is a big fat zero.
What we need to do is simple: ditch austerity, kickstart the economy with ambitious government spending, and bring down the deficit with my One-Penny-Solution until we’re back above water again. Most importantly of all, we need to do it now.
Time actually does NOT heal all things. Sometimes, it just makes them worse.