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Dec 19 2016

Zombie Economic Policy- Kill It With Fire!

One thing that’s important to understand is that the Neo Liberal Establishment is-

  1. All about taking wealth from the Working Classes and distributing it to the richest 10%
  2. Anti-Democratic in pursuit of goal #1 (see above)

Rinse and repeat.

If there is one thing that is clear from the recent election it is that a majority of United States citizens are unhappy with the current economy. Sanders voters were unequivocally dissatisfied, I supposed there’s room to argue about the proportion of Trump votes who shared that view and the number that are flat out bigots, misogynists, and racists and belong in the “Basket of Deplorables” but even though it’s hard for people to pay attention to more than 3 words at a time (which I suppose is why Twitter is so popular) let’s remember waaay back to the dim dark mists of History, a full 102 days ago on September 9th 2016, and remember what Hillary Clinton actually said-

We are living in a volatile political environment. You know, to just be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right?

The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it. And unfortunately there are people like that. And he has lifted them up. He has given voice to their websites that used to only have 11,000 people — now how 11 million. He tweets and retweets their offensive hateful mean-spirited rhetoric. Now, some of those folks — they are irredeemable, but thankfully they are not America.

But the other basket — and I know this because I see friends from all over America here — I see friends from Florida and Georgia and South Carolina and Texas — as well as, you know, New York and California — but that other basket of people are people who feel that the government has let them down, the economy has let them down, nobody cares about them, nobody worries about what happens to their lives and their futures, and they’re just desperate for change.

It doesn’t really even matter where it comes from. They don’t buy everything he says, but he seems to hold out some hope that their lives will be different. They won’t wake up and see their jobs disappear, lose a kid to heroin, feel like they’re in a dead-end. Those are people we have to understand and empathize with as well.

As I said, a majority, maybe not a big one, but a base you can build on if you ever want to see electoral victory again.

Unfortunately the Neo Liberal Establishment doesn’t seem to recognize that and is making no effort to compromise their goals.

I have two pieces from Dean Baker (who has a new, free book out- Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer) that I think are instructive.

The Trade Deal Crusaders: Can They Never Learn?
By Dean Baker, Truthout
Monday, 19 December 2016 10:07

One certain outcome of the 2016 election is that the Trans-Pacific Partnership (TPP) is dead, for the moment. The qualification is necessary because the proponents of the TPP and similar trade pacts refuse to accept that the country is not interested in further trade agreements along the same lines as past pacts.

Rather than accepting the reality that these trade deals really are unpopular, they seem to believe that they really just face a marketing problem. With a better jingle or a few witty phrases, the public will suddenly be anxious to buy the trade deals they are trying to sell.

Viewing the unpopularity of failed trade deals as being a problem of messaging is a denial of reality that deserves the name Trumpian. In the last 15 years, millions of workers have lost jobs due to imports and tens of millions have seen weaker wage growth — this is not a problem that will go away with better messaging.

The TPP and other next generation trade deals are also about putting in place stronger and longer patent and copyright protections (yes, that is “protections” as in “protectionism,” the opposite of free trade). The proponents of these trade deals continue to argue, almost as a holy cause, that we have to move forward with their agenda or something bad will happen.

If the issue is just that we need ever more trade deals, we can come up with directions that will increase the flows of goods and services between countries. How about a trade pact that reduces the barriers for the most highly paid professionals? Doctors are prohibited from practicing medicine in the United States unless they complete a US residency program. Dentists have to graduate from a US dental school (Canadian dental school graduates have been allowed in recent years.)

These and other barriers are classic protectionist measures. Yet, our “free traders” invariably look dumbfounded when asked how come these barriers persist in spite of their massive efforts at liberalizing trade over the last three decades.

Apparently protectionism is only a problem when it might benefit less-educated workers. The protectionism that benefits the friends and family members of the people who negotiate trade deals is just fine. (And for those concerned about brain drain from developing countries, we know how to compensate them for the loss of highly trained workers so that they can train two or three professionals for every one that comes to the United States.)

Robert Samuelson and the Second Great Depression Myth
by Dean Baker, Center for Economic and Policy Research
19 December 2016

Robert Samuelson decided to once again push the second Great Depression, applauding the Obama administration for preventing the Great Recession from turning into a depression. This is the great myth (I’m tempted to say “fake news”) that establishment types push endlessly with zero foundation.

It is important for the worldview they like to promote, in which we have seen a massive upward redistribution of income over the last four decades, well you know, that’s just because that is the way the world is. We may not like this rise in inequality, and after all President Obama did raise taxes on the rich and propose an increase in the minimum wage, and gave us Obamacare (all very good policies), but growing inequality is just baked into the genetics of the modern economy.

The Wall Street bailout that stands at the center of the second Great Depression avoidance myth is the world’s largest slap in the face of promoters of the baked into the genetics story.

We have free trade in manufactured goods but rigged protectionist measures that no one knows about to protect doctors, dentists, and other highly paid professionals. We have ever stronger and longer patent and copyright protections. These protections take hundreds of billions of dollars each year out of the pockets of the bulk of the population and give them to the people in position to benefit from them. Protection adds more than $350 billion a year to the cost of prescription drugs alone. We have a Federal Reserve Board that raises interest rates to throw people out of work, and keep workers from getting bargaining power, as a way of ensuring that an arbitrary inflation target is not breached.

These and other policy measures that redistribute income upward are occurring all the time and almost completely escape public attention. But the Wall Street bailout, that was impossible to miss. The basic story was that the greed and incompetence of the major Wall Street banks, Citigroup, Goldman Sachs, Morgan Stanley, Bank of America, and others, put them on the brink of bankruptcy. If we let the market work its magic, all of these banks would be condemned to the dustbin of history.

But rather than leave things to the market, maybe with a dash of retraining assistance for unemployed bankers, Congress and the Fed came racing to the rescue with the TARP and the Fed’s bailout. The banks were brought back from the brink of death with access to trillions of dollars of below market interest rate loans, coupled with Treasury Secretary Timothy Geithner’s promise that there would be no more Lehmans. In other words, the banks would not be allowed to fail no matter how bad their finances and how incompetent their leaders.

How do you justify this massive intervention to save the hides of many of the country’s richest people? Naturally, you say that it was done for the general good. No one really wanted to lend trillions of dollars to save Goldman Sachs and Citigroup, but it was necessary to keep the rest of us from enduring a second Great Depression: a decade or more of double-digit unemployment. The elites circled the wagons and agreed that this would be the story and anyone who didn’t agree would be called names.

I’m sorry, the second Great Depression story does not make any sense. The reason is that we know the secret for getting out of a depression; it’s called “spend money.”

If we had allowed the market to work its magic on the Wall Street banks there is no doubt that the initial downturn would have been worse, but the day after Goldman, Citigroup, and the rest went out of business there was nothing to stop the government from spending massive amounts to restore the economy, just as it did during World War II. It was this massive spending that eventually got the economy back to to full employment and finally ended the Great Depression.

The second Great Depression story depends on the country not just taking action immediately in the wake of a crash, but not ever. This view was even given academic gloss with a study by Alan Blinder and Mark Zandi. This widely cited paper contrasts the world in which we had the bailout and the stimulus with one in which we never did anything to boost the economy. It shows in the never do anything scenario we would get a decade of double-digit unemployment.

While this is taken as proof that we were saved from a second Great Depression by these actions, it actually shows nothing of the sort. The decision not to rescue Citigroup and the rest did not preclude us from a massive stimulus, the next day, the next month, or the next year, as assumed in the Blinder and Zandi modeling exercise.

In any case, the argument that we would have faced a decade of double-digit unemployment had we not rescued Wall Street rested on a political assessment, not an economic one. There was no economic reason that large amounts of spending following a financial collapse would not have boosted the economy back towards full employment and without the albatross of an incredibly bloated financial sector.

Anyhow, this is the story that the elite types do not want people to hear. They do not want everyone to know that we gave billions of months worth of food stamp benefits to the richest people in the country.

Is this a Class War? You’re damn right it is, and it’s well past time for Institutional Democrats to stop toadying to the Neo Liberal elites (who represent at best 10% of the country) and start serving the needs of their electoral base in the Working Class.