Economic stimulus–the right and the wrong of it
by Linda Beale
Economic stimulus–the right and the wrong of it
crossposted with Ataxingmatter
Clearly, for ordinary Americans, the US economy is still in a funk from the financial crisis caused by the housing boom funded by the easy credit of turnover securitization of mortgage loans, coupled with the casino banking mentality spurred by proprietary trading and naked credit default swap bets. (The wealthy, on the other hand, seem to be recuperating nicely, thank you, or at least still spending on luxury goods. See Even in Moribund Economy, Wealthy Spending More on Travel, Luxury Goods, Kiplinger, Sept. 24, 2010.)
The political parties have two very different answers to resolving this ongoing economic crisis for ordinary Americans.
- The GOP thinks that we need more of the same “medicine” that got us into this mess to start with–deregulation, privatization, tax cuts, and militarization. On deregulation, see, e.g., The Electricity De-Regulation Con Game, PRWatch.org (discussing the coalition of conservative groups supporting deregulation, including Heritage Foundation and Tom DeLay), Republican Candidate Seeks Return of De-Regulation , Newark Democrat Examiner, Sept. 30, 2010 (discussing NJ candidate Little’s support for Tea Party “free market” with the “absence” of government regulation). On tax cuts, see, e.g., Senate Republicans Firm on Tax Cuts for Rich, Reuters, Sept. 13, 2010; Republicans Pledge to Fight to Preserve Bush-Era Tax Cuts, Washington Post, Sept. 13, 2010 (noting that the GOP, unlike the Dems, wants to pass a new law providing a tax cut to the wealthiest Americans when the Bush cuts expire as scheduled at the end of 2010). On privatization, see, e.g., 104 Republicans in Congress Want to Privatize Social Security, ThinkProgress, Oct. 27, 2010; GOP Budget proposes to Ration Medicare, Privatize Social Security, CrooksandLiars, Feb. 5, 2010 (discussing the GOP alternative to Obama’s budget proposals); GOP’s Pledge to America would end up privatizing Social Security, The Nation, Sept. 24, 2010 . On militarization, see, e.g., Hard Line: The Republican Party and US Foreign Policy since World War II, The Nixon Center, Oct. 31, 2010 (suggesting that there is some division within the party based on its mantra of fiscal conservativism, but that most Republicans, and neo conservatives especially, support military spending even while demanding cuts elsewhere); David Broder, The War Recovery?, Washington Post, Oct. 31, 2010 (apparently suggesting war, and its huge military expenditures, as a way out of recession, in spite of the already huge costs of Bush’s two wars of choice) ; Conservatives Profess Support for Defense Budget Cuts But Still Want Weapons the Pentagon Calls Unnecessary, ThinkProgress, July 2010; Benjamin Fordham, Evolution of Republican and Democratic Positions on Cold War Military Spending (noting that the Republicans originally opposed increased military spending after WWII, but in the 1960s, the party began supporting militarization). It’s hard to believe that the American voters can be gullible enough to fall for the argument that we need “more” deregulation and tax cuts to cure the problem caused by deregulation and tax cuts, but apparently a good many may be. Party acolytes mouthe the mantra of tax cuts and spending cuts, but what few spending cuts are ever discussed are ones targeted at the so-called “entitlements”–meaning, programs that aid the down and out, the elderly, and the unemployed, like Social Security (and pensions generally, especially public pension plans for public employees), health care, and other such programs. Meanwhile, privatization includes privatizing Social Security (at least in part) and eliminating the progress (not complete) that we’ve made under the Democrats towards a more sustainable health care system (preventing insurance companies from refusing to cover someone, alowing children to stay on parents’ plans longer, making sure that insurance companies don’t refuse to pay covered items, creating a universal system so that the people who pay for their health insurance are not also forced to pay for those who gamble on having no health insurance but end up with expensive hospital stays, etc.). Presumably, if the GOP candidates win a majority, they will fight to ensure that tax cuts extend to the wealthy who have garnered an increasingly huge share of the income stream from GDP growth as they cut out the safety net from those whose wages have stagnated and declined because of their policies.
- The Dems (the ones that aren’t too afraid to talk about what their polilcy views really are) generally are on the other side of those issues–re-regulation (to prevent the kinds of casino banking problems that occured under Bush), maintaining public safety nets (rather than leaving the vulnerable at the mercy of the “markets”), decreasing military spending (especially for unneeded weapons systems and ideally by ramping down Bush’s wars), and tax cuts for the middle class but not for the rich who’ve gotten all of the growth while the middle class declined). They are also aware that when the private economy is slack, government spending needs to pick up the slack. Ideally, that government spending will be aimed at real needs–unemployment compensation, more money in the pockets of consumers in the bottom half of the income distribution who will spend it on things that they need, and/or public infrastructure that will help our economy expand (like public transit projects, research projects, support for research universities, etc.).
Now, in that context, what to make of David Broder’s Washington Post op-ed talking about war–it took a war, he says, to get us out of the Great Depression, and he seems to be suggesting that a war with Iran wouldn’t be such a bad idea to get us out of this Great Recession.
“What else might affect the economy? The answer is obvious, but its implications are frightening. War and peace influence the economy.
Look back at FDR and the Great Depression. What finally resolved that economic crisis? World War II.
Here is where Obama is likely to prevail. With strong Republican support in Congress for challenging Iran’s ambition to become a nuclear power, he can spend much of 2011 and 2012 orchestrating a showdown with the mullahs. This will help him politically because the opposition party will be urging him on. And as tensions rise and we accelerate preparations for war, the economy will improve.
I am not suggesting, of course, that the president incite a war to get reelected. But the nation will rally around Obama because Iran is the greatest threat to the world in the young century. If he can confront this threat and contain Iran’s nuclear ambitions, he will have made the world safer and may be regarded as one of the most successful presidents in history.” Id. (Broder in WaPo)
This from a person who has consistently opposed government spending and other Keynesian ideas for stimulus as inappropriate. War, he appears to think, is ok, but government spending on major public infrastructure is not? Now that is crazy. I refer you to Mark Thoma’s Economist’s View for a full dress-down of Broder’s essay, David Broder Calls for War with Iran to Boost the Economy, Oct. 31, 2010.
That Broder column fits with the rest of the GOP policies, which generally suggest that spending on military might is just dandy, but spending on the public infrastructure and safety net for the vulnerable is wasteful, or that tax cuts for the super-rich are fine, but earned income tax credits for the poorest amongst us are not, or that deregulation of banks will lead us to growth while regulation to include a consumer protection agency will hamper banks’ ability to make profits. What a warped view of society. I just hope that Americans aren’t naive enough to fall for it.
There is some kind of conflict in html code which breaks the page. Under the fold for this post will be fixed sometime today.
Linda,
There is no way in he!! that Obama is goign to confront Iran over there soon to be muclear capability. Not a chance. Nothing in his background, the current Dem party, or any of his advisors would go for that. It would break the Dem party in two like 1968. The Dems have a large peace-at-any-cost antiwar contingent that will literally go nuts. They have been dormant these last two years since its a D running the wars, but they would come out in force if Obama tries naything.
You are grasping at straws…
Islam will chnage
I fear that Broder misspoke badly, and is well past his prime. FWIW, Drezner at foreignpolicy.com offered this succinct reaction: “In case it’s not obvious, this is crazy for a number of reasons. One is that markets don’t like tensions, and certainly not the kind that jack up oil prices. Second, World War II brought the United States out of the Great Depression because it was a massive economic stimulus program that mobilized entire sectors of society. Today’s American military has all the tools it needs to fight Iran, and there isn’t going to be any sort of buildup. Hasn’t Broder been reading his own newspaper? The Pentagon is looking to find billions in cuts as it confronts the coming world of budget austerity.
I’ll leave the question of whether Iran is truly “the greatest threat to the world” to others.”
On the power issue we are continuing to fight the battles of the 1920s I have been reading Colussus on the building of Hoover Dam. Hoover thought public power was evil as did Coolidge. However Sen Johnson from Cal managed to push a bill thru that said the government would build the powerhouse at Hoover dam.
This came on the heels of the City of LA taking over Southern Califorina Edisons lines in the city so that the city and SCE still hate each other. (Exactly what San Fran tried with PGE a couple of years ago).
The right really want the Coolidge agenda of the abosolute minimum amount of government possible.
Linda, Buff is correct.
Since, you have included a list of party policies, can someone please list those solely republican policies which have put us into the current economic ditch? Y’ano, the ones to which the democratic leaders keep referring.
WWII Ended the depression? Or did the end of the war start the recovery?
“Today’s American military has all the tools it needs to fight Iran,”
No, but it does have all the tools to fight Midway again, as well as the North Africa campaign.
It would take doubling the 20% of US G outlay on the war machine and 20 years to get ready to fight Iran.
But there is need for a crisis to keep mobilized to meet the Imperial Navy off Midway, and save the Hawaiian territory.
They also refuse the “enlightenment” as well. Go back to 1758.
CoRev,
Uuuummmmm……
FDR was the interventionist as well as the New Dealer, what do you suppose is different.
You know the dems always got US into war: WW I, and WW II, Korea, Vietnam (JFK/LBJ)…..
It has only been since Reagan that the rethugs got to be wholey owned by the war profiteers.
Wilkie was isolationist, ala George Washington and anti social, unlike Geo Washington.
Buffy,
Wendall Wilkie was the isolationist in 1940, while FDR was the interventionist into Europe’s internal squabbles over thet little dog Hitler.
Wilkie was anti New Deal socialism, we know where FDR stood.
What happened, did the rethugs become interventionists and militarists? When?
Ilsm will not chnage
ILSM, none of that answers my question.
Which specific Bush/republican policies put us in this economic ditch? Y’ano, this ought to be really simple to answer. We hear the claims many times each day.
Anyone? Anyone? Barrack? Ferris?
CoRev,
Ilsm has once again turned into a spam-bot. Its the same thing over and over. Its caused becuase his ideas are so far out of the political mainstream they will never even be considered let alone actually implemented. Like the end-of-the-world guy at teh street corner.
Islam will change
“The Dems (the ones that aren’t too afraid to talk about what their polilcy views really are) generally are on the other side of those issues.”
Really?
As for deregulation, remember that Glass-Steagall was fully dismantled under Clinton. The Reps engage in more saber rattling rhetoric than the Dems, but in practice the Dems are just about as hawkish. And, to use a policy you did not mention, running a deficit to stimulate the economy, there is surprisingly little difference. The administration’s plan was and is to have high unemployment for years, only stimulating the economy enough to avert disaster. That’s why they say the stimulus worked. Clinton was proud of his surplus, not because it was countercyclical, but as a good in itself. Obama said last year that the gov’t has run out of money. The difference showed in the Rep opposition to extending unemployment benefits. I suppose that there is another difference. The Reps want high unemployment (to lower wages) and the Dems don’t particularly care.
It would only be fair to point out this statement:
“The days of the do-nothing Congress are over,” declared Democratic Sen. Harry Reid of Nevada, in line to become majority leader, adding that Americans spoke “clearly and decisively in favor of Democrats leading this country in a new direction.” – November 2006
Almost four years later (46 months), Obama still blames Bush and all Republicans for everything. Maybe the majority of citizens in the U.S. are sick of listening to that crap. We should know Tuesday night.
Obama never blames his administration nor the Democratic leadership in the Congress for anything. This guy never takes responsibility. Zip.
What is most interesting is that this is the Party of Abraham Lincoln and Teddy Roosevelt. Where did they go so wrong ?
The beginning of the rise in the whacko Republican Party was the passage of the 1964 Civil Rights Act under LBJ and Mike Mansfield. The Dixiecrat Block was incensed but it was not until the obviously racist Texas John Birch Society supported George Bush Senior with his bid for Congress and ultimately the creation of the new Republican Party in 1982 with Ronald Reagan as their public image.
Now we have a full blown John Birch, Ku Klux Klan Republican party,
Sandi Rubinspan: “What is most interesting is that this is the Party of Abraham Lincoln and Teddy Roosevelt. Where did they go so wrong ?”
Rutherford B. Hayes. The Reps ceded the South to the terrorists (the Dems). Had the Reps kept the interests of the freed Blacks at heart, they would not have become the party of the Moneybags.
CoRev/Buffy,
Monetarist theory, print like crazy. Greenspan, Bernanke all kicked up the bubbles.
Deficits don’t matter until they are not for inflating a wall st con…………..
Who is Dick Cheney, Milt Friedman, Reagan???
spambot indeed.
ilsm will not chnage
Buff,
I like taking the free thinking librul individualist ying to your tea party, lemming after Palin yang.
All the one liners no one wants to debate.
ilsm will not chnage
MG,
Took since 1981 to make this mess. And the inflated response to the 2002 recession let’s not talk bubble and turningthe titanic let’s just arrange the deck chairs paperring with wet greenbacks over the Reagan voodoo.
History started long before 46 months ago.
Buffpilot
Are you reading what Broder wrote and attributing it to me? I quote Broder’s four paragraphs (for some reason, the formatting from the original post didn’t pick up correctly here). I don’t think the Dems or Obama want to start a war with Iran, but the warmongering flavor to Broder’s post I found disturbing, especially if it is in any way indicative of a neo-conservative surge that will find expression after the election changes are in place.
Clinton was a democratic presidency in the midst of the Republican decades, and his ability to create any kind of left-leaning change was hampered by his sexual scandals and the Republicans’ willingness to push impeachment for that. Regretably, he also represented the neo-liberal wing of the party–the wing which is most compatible with the Republican mainstream control over the decades. So, yes, with the support of Summers and the rest of the Wall Street money crowd, he wrongly supported the dismantlement of Glass-Steagall and bought into the fantasy of a deregulated nirvana where financial services would save the country from the growing outflow of its manufacturing base and real knowhow.
The differences betweeh the parties are not absolutes, but there are trends in views that mean that Dems generally are more supportive of unions, more generous towards the unemployed, more interested in having fiscal policy support the working class, more interested in using government power to restrain corporate power, and more willing to tax the rich, etc. Dems are far from being progressive across the board, but there are at least progressives amongst them.
ilsm,
The fact that the Democrats have had control of the Congress (both chambers) since 2007 appears to be lost on some, including Obama.
I expect that history will show that Obama set back the political landscape for an extended period. He has yet to demonstrate the level of leadership necessary to insure that the legislative gains will remain in place. Moreover, it appears that he may sell out Social Security and Medicare before the fight is over. Nothing good about that in my opinion.
Color me unimpressed.
I would apologize in advance for my english, I do my best.
Even if it is a corrupted and evil regime, I think it would be a mistake to consider Iran as “the greatest threat to the world in the young century”.
Iran is a threat only for the countries in Middle East. Even with the H bomb, they wouldn’t attack the US, because a war against US would bring them nothing else but the entire and quickly destruction of their land. That’s how it goes between nuclear countries, and that is also the reason why they will not attack Israel either.
Iran is dangerous in another way. If they got the bomb, they will face no obstacles on their way to taking control of the Middle East and its market (especially oil). They will be member of the club of “those who got bomb”, which means be part of the countries that run the current geopolitical, while hating each other. They could do things that put the West in economic hardship, and they probably would.
Concerning terrorists groups, the assistance provided by Iran is only for Hezbollah, which is a menace to Israel. They have nothing to do with Al Quaeda, which hate them for theological questions. Remember that most of Iranian people are “Shias”, while most of the other Muslims are “Sunnis”. There are more differences between the Shia and Sunnis than between Catholicism and Protestantism.
The “greatest threat to the world in the young century” is undoubtedly the proliferation of Talibans in Pakistan. Like Iran, Pakistan is a corrupted and evil regime, but this regime is helped by the US, in order to fight against Talibans.
History : first, China get the H bomb by its own way, to be respected and not be treated like a “third world country” by US and USSR. To protect themselves from an attack of China, India get the bomb with the help of the US. Then, to protect themselves from an attack of India, China helped Pakistan to get the bomb. Since, both India and Pakistan threaten each other to use the bomb to any incursion into their territories.
Here is the point : a band of fanatical psychopaths, whose behavior is unpredictable, Taliban, is now threatening all strategic points of a nuclear country, Pakistan, and nobody cares. Everyone is turned to Iran, but it’s a waste of time.
If Talibans get the power in Pakistan, they won’t wait before sending all H bombs they got the West, including US. As an enemy of the Taliban, Iran would become a valuable ally of the US.
MG:
How has Obama had control of the Senate with obstructionist Repubs. blue dogs, and flip-flop Lieberman? History will show the opposite of what you propose. You are wrong and clearly on a tangent.