Update at end.

A quick postscript to yesterday's post, which was about how McCain can't shake the party propaganda about how any/all government regulation hurts the economic efficiency and freedom of the private sector. Actually, this is Milton Friedman's propaganda, but it served Reagan well, at least rhetorically, so it's become GOP gospel, even if it isn't honored in fact any more than Jesus's chastisement of the rich and opposition to war.

If the current financial crisis prooves anything, it's that when times get tough, virtually everyone in America looks to government for help: not just the poor and downtrodden, but the rich as well. In fact, the rich have the sort of contacts that let them cut to the head of the line. This point is pretty obvious because it reeks of hypocrisy.

The less obvious point we should take from this crisis is that, much as John Edwards noted their are two Americas, there are now two depressions. The one in the news -- the one the Bush administration is so frantically acting on -- is the depression of the rich. In 1929 it was a depression of the rich that plunged the rest of the country into deep poverty, so vague memory suggests that government action now will save us all a lot of pain down the road. That may be true, but there's been a depression of the poor in this country for several years now, and it's not just one of those two-quarter blips in the business cycle that get the bean counters hepped up. The depression of the poor is something the GOP has had little trouble ignoring, not least because they're responsible for much of it. The Democrats have also tended to ignore it, focusing on the money that feeds practical politics, pointing to the myriad ways Bush has wrecked the country for decades to come, and appealing to the increasingly fragile middle class as the only visible, respectable representatives of the numerically overwhelming non-rich.

The Democrats embrace of government as a system to deliver help to all segments of the private sector and to provide responsible stewardship of the economy and our (recently disastrous) path in foreign affairs is in tune with what virtually all Americans actually believe and expect. Less clear, of course, is whether they can actually do that, especially given the corrupting influence of special interests, but at least they grasp the principle. McCain and his ideologically pure advisers don't have a clue, which is why their reactions are so kneejerk and their proposals are little short of insane.

Oh, yes, the concluding point I wanted to make but didn't: I think the rich and poor depressions are related. The old Keynesian view of this is that depressions are caused by a shortage of demand, which can be remedied by putting people to work -- even on make-work projects, like World War II -- and thereby putting disposable cash into their hands. What we've actually seen is the converse of this: workers have been put on a long-term diet, gradually being starved, which sooner or later has to suck the demand side out of the economy. This process has been stretched out: by extracting more work for less pay, the value of the work has kept the system going, and the missing cash has been partly compensated by easier access to debt, at least until recently. The debt, in turn, has escalated to the point where it has become a giant house of cards: with relatively little labor to back it up, the financial powerhouses of the rich and ultrarich have been running on fumes, absorbed in a self-inflationary bubble that has less and less to do with the real economy. I seriously doubt that you can patch up the financial system without rebuilding the basic foundation of the economy, which whether you like it or not still depends on old-fashioned labor.