Friday, June 28. 2013
I normally don't bother reading Ross Douthat's nonsense, but the Wichita Eagle ran a column called Obama's priorities disconnected from nation's. His setup:
First thing: lots of code words on that list, like "entitlement reform" (aka "wrecking Social Security") and "reforming the tax code" -- for Republicans, a scheme to reduce taxes on the rich by making them more regressive. (We've had some of that here in KS, exempting the Kochs from income tax -- they're "job creators," see -- while raising sales and property taxes, cutting services, increasing college tuition, and setting state government up for bankruptcy.) I don't know how Pew weasel-worded those issues to get "sizable majorities" behind them, but they could have been worded differently to different results.
"Health care costs" is another matter: the Democrats actually passed something on that a couple years back -- ever heard of the Affordable Care Act? how about "Obamacare"? -- but Republicans opposed it in the first place and have tried to sabotage it ever since. It would be nice if both parties could recognize what a serious problem this is and work together to better manage costs while improving results, but the Republicans are dedicated to defending every rent-seeking opportunity businesses can find to rip off people, even if doing so undermines health care. (Nor have many Democrats been immune to industry lobbying. By the way, what did that Pew poll find about the desirability of limiting the influence of money on politics? That's a very popular issue that both parties are disconnected from.)
Still, after the setup Douthat focuses on "the issues that Americans actually prioritize -- jobs, wages, the economy." He means to demean Obama for speaking on climate change and the Senate for working on immigration reform, as if those aren't real problems, or we cannot expect politicians to work on more than one thing at a time. Still, he's inadvertently hit on something big here, and while his beloved Republicans are far more out to lunch on economic matters than the Democrats are, there's little evidence that Democrats like Obama have a clue how to solve these problems.
Actually, there are two problems here: the macroeconomy, and inequality. The problem with the macroeconomy is insufficient demand compounded by excess capacity. As anyone who understands anything Keynes wrote already knows, there is a straightforward solution to insufficient demand: have the government, which unlike the private sector can do things just because we want to see them done, buy more goods and services until demand and supply reach an equilibrium, then back off as the private sector picks up the slack. What kind of stuff doesn't matter much for the equation, but investments in infrastructure and human capital (education, science, the arts, etc.) tend to do more to raise our collective wealth than mere make-work projects, and much more than destructive projects like war.
Obama did something like this when he pushed his stimulus bill through Congress, but he underestimated how much stimulus would be needed to make up for the private sector losses in the crash. The Republicans, of course, fought him tooth and nail, and as such contributed to the political calculation to ask for too little money for too little time. They kept him from going back to the till for more stimulus money, and they actively sought to limit and ultimately undermine automatic stabilizers like unemployment benefits and food stamps. (Just this week, North Carolina became the first state to kill off its unemployment programs altogether, and you can thank the Republicans there for that.) Republicans have long campaigned for cuts in government spending -- not that, when they held the presidency they actually did much about it -- and over the last few years they've managed to kill off nearly as many public sector jobs as the private sector has added, keeping the job market pretty consistently tanked.
The problem here is that the Republicans see no problem. The "economy" is made up of business owners and workers (and various others), or more pointedly profits and wages. It can be grown broadly -- the "rising tide raises all boats" metaphor -- or inequally. What's happened is that the "recovery" has, pretty much by design, favored profits over wages, and in fact profits (and asset values, at least the stock market) have fully recovered their pre-recession levels, largely at the expense of real wages. For some people the recession is over, and if it continues to hurt workers, so much the better. Both parties are "pro business" these days; what distinguishes the Republicans is how virulently anti-labor they've become.
This didn't just happen. This reflects two trends. One is increasing inequality, which we'll get to. The other is the increasingly predatory nature of business. Capitalism has long run the gamut between two poles: you could make something new of value and sell it, or you could just steal. In the former, one creates positive value; the latter is just a zero-sum game. Capitalism's great claim is how it has raised our standard of living, but that has only been through the former: by creating new goods and selling them to more and more people. Adam Smith showed how the narrow pursuit of self-interest can lead to this good fortune. But what happens when those greedheads discover that they can make more profit stealing than building? Well, that's what has happened in the United States, especially, in recent decades. The leaders have been the banks and bank-like outfits like hedge funds, which have more than doubled their take from the US economy. Of course, most of what they've done is "legal" -- a testament to the intrinsic corruptibility of the American political system, which has responded to growth of lobbies with all sorts of favors, from tax breaks to patents to deregulation to liability protection to ending antitrust enforcement. And while defrauding your investors and screwing your customers are common enough ways to increase profits at someone else's expense, most companies have looked hard at their labor costs: automating jobs, outsourcing them, even good old fashioned union busting -- which the political system has made ever easier.
The increase in economic inequality, which has been continuous since 1980, is a way of keeping score in the class struggle, one which has been consistently won by the rich against those who merely work for a living. And while the Republicans have been shameless in advancing the interests of the rich, and remarkably indifferent to whoever they victimized, the Democrats don't seem to have a clue how to counter the trend, or even to understand why they should. Part of this is that the Democrats aren't immune to the charms and rationalizations of the lobbyists: indeed, the system is so prone that it selects for the most corruptible of Democrats: hence the party dominance of Obama, Clinton, Kerry, Gore, and their ilk -- people whose sense of status is governed by their ability to run shoulders with the Buffetts and Dimons of the world. At best all they can offer are paeans to the lost "middle class" -- a code word that lets some workers feel more worthy than others even though the real differences have more to do with good luck.
There are a lot of problems with increasing inequality -- Jared Bernstein has a good recent post on this, and even he barely scratches the surface -- but one of them is that it erodes the aggregate demand that drives the economy. One way to visualize this is to imagine a zero-sum economy where the share held by the superrich is increasing by stealing from everyone else. One thing that differentiates rich and poor is that the poor spend virtually all of their income but the rich doesn't -- they can't consume all they make so they save. In an growing economy their savings may be put into increasing capacity, but in a zero-sum world their gains reduce demand and wind up being invested in non-productive schemes -- indeed, the only way they can get their expected rate of return is to join the thieves (even if they often wind up the victims of speculative bubbles and fraud).
For a long time, the "middle class" could mask their losses by borrowing, especially against the inflated asset values of their houses. (They also compensated by working more hours, mostly by making the two-earner household the norm.) All that ended with the crash, and it isn't likely to come back again. Before the crash the Republican message was to celebrate those who could maintain the illusion of being better off -- "family values," for instance, emphasized the value of marriage, which usually meant two earners pooling together an income that was slightly better than one person could do in the 1950s. Since the crash, the message has changed: now it's that you're screwed (times are tough, we all have to tighten our belts), but it's because the liberals are lavishing help on the unworthy poor.
Hard to believe a party can get by with such callousness, but the Democrats are blind and helpless, tied up in knots by their cold war allegiance to capitalism and their ongoing dependency on corporate lobbyists. At best they can nip around the edges: raise the minimum wage, extend unemployment compensation, give workers a bit more take-home pay by limiting payroll taxes, extend health care insurance. And they understand the need to bump the income tax on the rich up, although they tend to think of using that to balance the budget rather than expand spending -- that endless characterization of the Democrats as the "tax-and-spend" party has taken its toll, inhibiting them even when that's exactly what is called for. (If the Democrats had repealed the Bush tax cuts first thing in 2009 and spent the savings and some safe multiplier on extra stimulus, the economy would be in better shape now.)
Much more needs to be done about inequality, starting with a psychic blow to the notion that endless accumulation is any kind of virtue, much less the highest one. Using progressive taxes as a kind of socio-economic leveler is part of the answer, but there is much more that can and should be done. If Obama were to take on this issue, he would find a connection, but he wouldn't find a fan in Douthat. Rather than present anything remotely plausible of his own about how to get those "good jobs" back, he descends into blather:
I can't imagine what a "liberal Reagan" might mean. The one thing Reagan did was to transport a sizable slice of the country into a fantasy world from which we have yet to emerge -- one where Obama seems to be as befuddled as anyone, which is what makes even his noblest rhetoric painful to hear. As for the "Reagan recovery," it came out of a very different kind of recession. Demand then was blocked behind artificially high interest rates, and surged when those rates were lowered. Reagan's tax cuts had less to do with the recovery than with how its fruits were distributed. Those years were relatively tolerable because we lived in a much more equitable society then. That we've sunk so far since then can be directly traced back to the bad decisions and deceitfulness and greed of the Reagan administration.
However much Obama admires Reagan as a practical politician, it's folly to think that anyone would aspire to be "the liberal Reagan." Or even dread. Much more likely is that Obama will come to be seen as the "liberal Hoover": the guy who couldn't do even what he wanted to because he had his head wedged so far up the assholes of Wall Street bankers, and thereby let a bad recession drift into a decades-long depression.