May 03

A Lost Decade or Ten . . . .

This past Wednesday, Larry Summers and Paul Krugman both spoke at different events and both warned of a lost economic decade–or decades–in the United States. While I am loathed to accept anything spewing from the frothy mouth of Larry Summers, he was uncharacteristically cogent in his remarks. Mr. Krugman continued–much to his credit–to pound the drum for decreased austerity, increased stimulus, and more proactive programs to spur employment. Mr. Krugman is widely regarded as championing policies that hang precariously the fringe of mainstream economic thinking, while Mr. Summers has long been a technocratic proponent of free markets.

“For the first time in 75 years, we are experiencing a protracted recession due to a lack of demand,” Summers said during a speech to the Center for Global Development in Washington. “It’s now been about five years since the recession began and it appears the stagnation will be with us for another long interval.”

“There is not enough demand,” Krugman said during an appearance at the Economic Policy Institute, where he gave a talk to promote his new book, End This Depression Now. “We focused a lot – too much – on the financial sector’s problems. Yet that is long since gone and we still don’t have a steady recovery. That tells us the crisis was far more about household debt.”

Summers chose to focus on fixes to income inequality through progressive taxation as medicine for the demand problems in the United States, while Krugman focused on retracing the cuts in government spending at the federal and state level in order to increase expendable income, employment, and certainty. Both men are correct. Summers is correct in that if the United States is to allow the tax system to remedy income inequality rather than to implement tight regulation and limits on executive pay and compensation, then individual–namely wealthy individuals–and corporate tax revenues must necessarily increase. He also points out, falsely I believe, that much of the job losses caused by technological innovation in the manufacturing sector are to blame for much of the income inequality, and that nothing can be done to reverse that trend. Krugman is correct in that it was wholly irresponsible to react to a short term protraction in government revenues by slashing millions of public sector jobs. By failing to recapitalize state and municipal coffers, the federal government has exacerbated the huge demand problem and contracted government tax revenues. Krugman also points out that the long slog of short term fixes to the tax code and stop-gap measures on infrastructure funding have created an uncertain contracting environment for federal and state agencies, leading to the cancellation and procrastination of major improvement and repair projects. In doing so, the government has further dragged down consumer spending, employment, and government revenues. Continue reading

Apr 11

Obama Hits a High Note

Every once in while President Obama reminds us all why we were so hopeful in late 2008. While regularly according lip service to the middle class and castigating bankers immediately prior to retreating into conference rooms to cut deals that aggrieve the middle class and reward bankers, he occasionally makes a point so eloquently that it is worth publishing. In a recent speech in support of the Buffet Rule–a change in the tax code requiring the wealthy to pay a minimum income tax rate of 30%–he succinctly made the case for investments in the middle class.

If we’re going to keep giving somebody like me, or some of the people in this room, tax breaks that we don’t need and can’t afford, then one of two things happens. Either you’ve got to borrow more money to pay down a deeper deficit, or you’ve got to demand deeper sacrifices from the middle class, and you’ve got to cut investments that help us grow as an economy.

You’ve got to tell seniors to pay a little more for their Medicare. You’ve got to tell the college student, `We’re gonna have to charge higher interest rates on your student loan, or you’re going to get smaller student loans.’ You’re going to have to tell that working family that’s scraping by that they’re going to have to do more because the wealthiest of Americans are doing less. And that’s not right. The middle class has seen enough of its security erode over the last few decades. And we shouldn’t let that happen.

We’re not going to stop investing in the things that create real and lasting growth in this country, just so folks like me can get an additional tax cut. We’re not going to stop building first class schools and making sure that they’ve got science labs in them. We’re not going to fail to make investments in basic science and research that could cure diseases that harm people or create the new technology that ends up creating entire industries that we haven’t seen before.

With each passing day the argument that tax inequality and wage unfairness moves closer and closer to playing a substantive and important role in the November election and beyond. It is quite possible that the occupy movement, the 99% Spring movement, and other collateral progressive grassroots movements across the country will  make it untenable for even the most duplicitous of politician to ignore the importance of economic fairness. I certainly hope so. It would certainly be refreshing to live in a time in  American politics when the middle class conclusively annihilates the practice of voting against its own interest.

Ironically, if the Republican Party somehow manages to retake the United States Senate and maintains a controlling position in the House of Representatives, they could find themselves governing during a period of extreme unrest concerning the economic path of the country. Economic injustice generally, real wage stagnation, retirement insecurity, tax inequality, Social Security, Medicare, unemployment insurance, health benefits, increased demands on worker productivity could each become primary issues in 2013  and beyond. Republicans would be forced to either repudiate their ever shrinking ultra-conservative base or face the prospect of defeat. Democrats would be forced to return to the progressive policies they have so long ignored.

The Buffet rule is polling well, but it will not alone carry Obama to reelection. The true test is whether or not the American people will ultimately abandon the failed economic policies of both parties and fight back, sending each politician packing who fails to understand that we will not be bullied by corporations, Wall Street and special interests any longer.