What I can’t figure out

Michael Lind wrote a great column in Salon this week.  It’s does a great job of encapsulating what the problem is with our country, Nobody represents the American people.

The disconnect between the actions of the government and public opinion is the central fact of American politics today. It doesn’t seem to matter whether liberal Democrats or conservative Republicans are in power. Only minor, marginal reforms ever take place. The basic outlines of American economic policy and foreign policy remain the same, even as Congress and the White House change hands. The changes promised by progressive Democrats and Tea Party Republicans are quickly discarded after the elections.

The changes that do take place are often the opposite of those that majorities of Americans want. Most Americans want Social Security to be strengthened and American manufacturing protected. But the conversation among elites inside the Beltway-New York bubble is about cutting Social Security and more one-sided “free trade” deals with mercantilist nations that, unlike the U.S., protect and promote their domestic industries.

Many Americans have come to the conclusion that nobody represents them in Washington anymore. They are right.

For the rest of the column he goes on to describe how the decline of “mass membership organizations” – unions, political parties and non-profits like the United Way and UNICEF – has changed our system. Non-profits and the political parties used to be funded by the people, and the organizations were imbued with the spirit of those people who were working together for a common purpose. But that has now changed because of how these organizations are now funded, by very few wealthy elites.

Mass membership organizations were important in the nonprofit sector as well. Local chapters of organizations like the United Way were part of state and national federations.

In the last half-century, as scholars like Robert Putnam have shown, these civic armies have more or less collapsed and have been replaced by small, elite organizations that specialize in raising money from a shrinking number of Americans who monopolize a growing share of the gains from national economic growth. This is as true on the political left as on the political right.

The national parties have long since ceased to be healthy mass membership federations. The national and state parties have been reduced to shells. Most Democratic and Republican politicians are independent entrepreneurs, raising as much money as they can on their own. Like the bank robber Willie Sutton, they go to where the money is. It is more efficient to get a few big checks from billionaires and industry lobbies than lots of little donations.

Again and again our ills turn back to what has transpired over the last 30 years – increasing income inequality, stagnant wages, and the destruction of the middle class. The story of the United States is one of the constant power struggle, the ebb and flow, between the people and the powerful. We are obviously in an era where the powerful.

There is another place where this is having and tremendous impact and that is in our country’s social make-up at the most basic governing level – marriage and family life. This from a recent PEW study called, “The Decline of Marriage and the Rise of New Families“.

A new “marriage gap” in the United States is increasingly aligned with a growing income gap.

As the social safety net and protections that were put in place after the Great Depression and World War II – that we’re responsible for the creation of the middle class in America – have been eroded and decimated over the last 30 years, it should come as no surprise that the same thing has happened to the middle class.

Union membership, public education funding, higher education funding, the GI Bill, higher taxes on wealth and the wealthy, the internet, research and development, a man on the moon (NASA), the interstate highway system, and on, and on, and on, as well as the largest middle class the world had ever known are all either gone or in steep decline or disarray. All because those with so much, want to make sure they have more.

My wife and I discuss all the time the lack of historic perspective in our country, which likely is a result of the decline in education and critical thinking.  To me the answer to our problem is in our history.  We’ve been in this predicament before and got out of it.  But no one in Washington, with any real power to change things, seems to be aware of that, much less represents me and  my view.  How to change our country so that the people, and not the powerful, are well represented is what I have not been able to figure out.

Lind makes the case for massive infrastructure spending to create jobs

Yes, yes, and yes it all I have to say, Can infrastructure-led growth save the economy?

The debate about American economic policy can best be understood with the help of a remark by the fictional detective Sherlock Holmes: “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.” When you have eliminated impossible policy options, whatever options remain, however difficult, must be pursued.

In the case of the economy, the problem is the weakness of private domestic demand in the U.S. The purpose of the tax cuts in the stimulus bill and “cash for clunkers” was to increase consumer demand until it revived to lead a recovery. But most businesses met the additional demand without new hiring and many Americans used the money to pay down debt or increase savings. The other parts of the federal stimulus — spending on infrastructure and aid to the states — were too small and largely counteracted by the contraction of state and local economies.

Where will the demand needed to induce businesses and banks to invest their hoarded cash come from? Wage-led private domestic demand drove American economic growth in the Golden Age of the 1940s-1980s. Debt-led private domestic demand drove American economic growth as well as the world’s in the Bronze Age of the 1990s-2000s. Now private domestic demand is weak and likely to remain so. In the Iron Age of the U.S. economy that has followed the collapse of the asset bubble of the last decade, American households are gradually reducing their debt-to-income ratio. To judge by the experience of other countries that have suffered from asset bubbles, the entire process might take 10 years, even 20. In the meantime, some driver of American growth other than private domestic demand must be found.

[...]

If neither foreign private demand nor foreign public demand can compensate for the loss of American private domestic demand, then the only possible source of increased demand for American goods and services that remains is public domestic demand. American government at all levels may need to provide much of the missing demand for American businesses and labor, for the decade or longer that is needed for private sector deleveraging in the aftermath of America’s asset bubble.

To avoid competing with private enterprise, the government should produce public goods that increase overall productivity and that the private sector has no incentive to provide, in good times or bad, such as infrastructure and social services like policing, health care, education and care for the young and old. In addition to mobilizing idle resources and labor directly, both infrastructure and public service spending could help business in general by boosting the purchasing power of Americans who are now unemployed.

[...]

Infrastructure projects that enhance American productivity should be paid for by borrowing, with their costs repaid more rapidly over decades or generations with the help of the more rapid economic growth that they make possible. If more federal borrowing is blocked by the irrationality of deficit hawks and the ignorance of many populists who do not understand public finance, then money for infrastructure should be raised by tax-favored municipal bonds, like Build America Bonds (BABs), and/or by the creation of public investment banks, like a national infrastructure bank, that can raise funds by issuing their own government-backed but off-budget bonds.

Deficit hysterics to the contrary, U.S. federal, state and local debt, along with the “agency debt” issued by government-sponsored enterprises, will continue to provide desirable, safe investments for investors at home and abroad. Investors may gamble in emerging markets, but where will their money be safer than in the U.S.? In demographically declining Europe, suffering from misguided austerity programs? In dictatorial China, where oppressed workers are rioting and committing suicide? In authoritarian, secretive, insecure petrostates?

[...]

The very idea of a “stimulus” was always misconceived. It assumed that government action was needed only temporarily, until private domestic demand returned the U.S. economy to something like the pre-2008 status quo. What is needed, however, is not a brief episode of intensive care for an otherwise healthy patient, but a pacemaker and an artificial hip for a patient who cannot emerge from a coma without radical, reconstructive surgery. If the Iron Age of the economy is to come to an end, the expansion of public domestic demand must be large enough that it can play much of the role in the American economy played by wage-led private domestic demand in the Golden Age of the 1940s-1980s and by debt-led private domestic demand in the Bronze Age of the 1990s-2000s. Even the conservative ideologue Amity Shlaes, in her anti-Roosevelt screed The Forgotten Man, concedes that massive public investment worked in 1936: “The spending was so dramatic that, finally, it functioned as Keynes … had hoped it would. Within a year unemployment would drop from 22 percent to 14 percent.”

In the summer of 2008, Lawrence Summers, now President Obama’s chief economic adviser, declared that any stimulus should be “timely, targeted and temporary.” He was wrong. The expansion of public domestic demand that America needs must be prompt, productive and prolonged.

Bring on a 21st Century WPA!

Wrong and unpopular, not a good combination

Michael Lind in Salon today shows how Obama is missing the bus on the economy, The American people want more government spending.

Is it possible to be in favor of more federal spending now to save the economy and promote jobs, while being in favor of deficit reduction in the long term? It is not only possible, but necessary. The more rapidly the economy grows, and the greater the number of Americans who are employed, the higher tax revenues will be and the sooner federal deficits can be reduced without measures that would cripple the economy, like raising taxes and cutting spending in the middle of a near depression.

On this issue, President Barack Obama has failed to articulate a position that is both right and popular. Instead of emphasizing that borrowing more to pay for infrastructure investments and job creation now will pay off in greater revenue growth and faster deficit reduction later, he has taken measures like proposing a freeze on deficit spending and supporting the deficit commission, with its right-wing bias. By doing so, he has effectively conceded the right-wing argument that the federal government is spending too much in combating the Great Recession at the present moment, instead of what is in fact true —it is spending too little. (If Obama sincerely believes the former, then he is the wrong person for the job, and economic leadership will have to come from Congress, not the White House).

Further evidence that Americans are more concerned with job creation and shoring up social insurance comes from the AmericaSpeaks “town hall” forums sponsored by deficit-hawk billionaire Pete Peterson. As numerous commentators have pointed out, Peterson must be disappointed if he expected these forums, coming shortly after his associate David Walker’s deficit-fear-mongering “IOUSA” movie and discussion tour, to demonstrate public support for the case he has made since the 1990s, in good times and bad, for major cuts in Social Security and Medicare.

Even though they were probably less liberal than the public as a whole, the AmericaSpeaks town hall participants delivered a devastating setback to the Peterson-Walker agenda. By 51 percent to 38 percent, AmericaSpeaks participants favored more stimulus spending. To reduce budget deficits, the participants favored cutting defense spending and raising taxes on the rich.

A majority of the AmericaSpeaks participants opposed reductions in Social Security benefits. To pay for future shortfalls in Social Security revenue, participants favored raising the payroll-tax cap above $106,800.

Indeed, an extraordinary 85 percent of AmericaSpeaks participants favored lifting the payroll-tax cap. This option was mentioned by Obama in his 2008 presidential campaign, but despite its popularity with the American people, it is not to be found in mainstream discussions of Social Security, which are instead focused on cutting benefits and forcing elderly Americans to work longer. Obama is partly responsible for this, because his administration ruled out any increases on taxes for people making under $250,000 a year.

Here we have a clue to the oligarchic nature of the contemporary American political system. As observers pointed out during the campaign-year debate about lifting the cap on payroll taxation, only the top 5 or 6 percent of American wage earners would be affected. But that tiny minority includes the overwhelming majority of politicians of both parties, as well as think tank experts, elite journalists and other opinion makers — to say nothing of the donors to both parties. Is it coincidence that affluent members of the bipartisan political class, whose members pay considerably less as a percentage of their income to Social Security than do janitors and maids, want to keep it that way? And is it coincidence that members of the elite political class, who are the least dependent on Social Security for their retirement income, are the most vocal about making the less-well-off majority work longer in order to receive less?

In the Roman Republic, the two parties were the populares, representing the ordinary citizens, and the optimates, representing the hereditary elite that controlled the Senate. Analogies between Rome and the U.S., particularly in foreign policy, should be taken with a grain of salt, but we do seem to be re-creating something like the politics of late republican Rome, right down to a Senate controlled by rich, reactionary optimates and the equivalent of Rome’s slave population in the form of illegal immigrants and indentured servants like H-1B’s who labor on American soil without the civil and political rights of Americans.

The apparent lack of interest on the part of our elected officials in the actual views of the American people about Social Security, stimulus spending and other subjects makes sense, once it is understood that most ambitious Washington policymakers of both parties seek to engage in triangulation between the party of the people (non-elite Democrats, Republicans and independents) and the party of the oligarchy (elite Democrats, Republicans and independents). The politically attractive position is the one that will be least alienating to the non-elite majority and the elite minority, two groups that are given equal weight in spite of the great disproportion in numbers between the two.

If the populares were the ignorant yahoos that the press controlled by the optimates would have us believe they are, then we might welcome the check on mob passions provided by our oligarchic institutions like the U.S. Senate. But when it comes to support for more federal spending to combat the Great Recession and raising taxes on the affluent rather than cutting benefits for the needy as the solution to Social Security revenue problems, sound economic analysis and the preferences of the majority are aligned.

The problem with American politics is not that it is too easily influenced by public opinion. The problem is that it is not influenced enough.

It’s past time for Obama to change course.