Reich Reviles Rotten Reaganomics Rehash -- Congress Passes Stimulus II

Senator Tim Johnson was on SDPB Dakota Midday Tuesday insisting that he had no choice but to vote for the $858 billion Stimulus II that the Republican leadership and President Obama worked out. Funny: Senator Tom Harkin from Iowa thought he had a choice. So did twelve other Senate Democrats, six Senate Republicans, and one Senate Indy-Socialist (roll call vote #276 here).

South Dakota's last Democrat in Washington needs to read more Robert Reich. America's best darn former Secretary of Labor critiques exactly this false "have no choice" excuse. Reich says we ought to have the courage to choose something other than a rehash of failed Reaganomics:

Supply siders are also fond of claiming that Ronald Reagan’s 1981 tax cuts caused the 1980s economic boom. There is no evidence to support this claim. In fact, that boom followed Reagan’s 1982 tax increase. The 1990s boom likewise was not the result of a tax cut; most of it followed Bill Clinton’s 1993 tax increase.

Nor did George W. Bush’s tax cuts trickle down. Between 2002 and 2007 the median wage actually dropped. And Bush’s record of job creation was pathetic relative to Bill Clinton’s, when taxes were higher. Under Clinton, America added 22 million net new jobs. Under Bush, barely 8 million [Robert Reich, "The New Tax Deal: Reaganomics Redux," blog, 2010.12.16].

Holy cow: our gal Stephanie and my man Dennis both voted aye! Michele Bachmann and Anthony Weiner voted nay. We should have more votes with alignments like that.

Wow: two empirical examples of significant tax increases followed by better economic growth than we got after the Bush tax cuts... ineffective cuts that we are now extending.

I know, it's all over but the shouting. But there are economic lessons we aren't learning... and I intend to keep shouting them.

Keep Fighting, Dems: Obama-GOP Tax Deal Entrenches Plutocracy

Dennis Kucinich is not planning to challenge President Barack Obama in 2012. Maybe we can draft Robert Reich, who justifies efforts Kucinich and other rowdy Dems may make to beat the Obama-GOP tax-rate deal into better shape:

If the Democratic Party has stood for anything over the years it is to maintain and restore upward mobility for the majority of working Americans, ensure that the playing field isn’t tilted in the direction of the privileged, and limit the power of the richest among us to entrench themselves and their heirs into a semi-permanent plutocracy.

Continuing the Bush tax cuts of 2001 and 2003, including a sharp cut in the estate tax, violates these core principles. Doing so in the midst of an economic emergency that demands bold measures to rescue America’s vast middle and working class adds further insult. For President Obama and former President Clinton to tell America there’s “no other choice” or that “this is the best we can do” — when Democrats remain putatively in control of the House, Senate, and the presidency — is misleading [Robert Reich, "Why Democrats Should Disregard Bill Clinton's Endorsement of Obama's Tax Deal," blog, 2010.12.11].

Among the things I appreciate about Reich's call to principle is that he acknowledges that he admires his former boss and the current Commander-in-Chief as "good men." Yet he disagrees with them, civilly and passionately... just as we could in a good healthy primary. Hmmm... Reich-Kucinich 2012? Weiner-Paul?

Bachmann, Reich Agree: Time to Nationalize BP

Congresswoman Michele Bachmann, the Kristi Noem of Minnesota (or is it Gordon Howie?), demonstrates how bashing President Obama trumps any philosophical coherence in the Republican Party. Trying to turn the oil disaster in the Gulf of Mexico into political hay, anti-government crusader Bachmann amplifies our Senator Thune and rails against the President for not executing a government takeover of BP:

BACHMANN: The administration, they were hands off. They didn’t do anything. Where were the boats that could have been commandeered by the government to be sent into this region to deal with that oil plume as it was coming up in the water and destroying marine life? Nowhere to be found. Why? The administration was hands off on this policy [Rep. Michele Bachmann, House of Representatives, 2010.05.28, quoted on Think Progress, 2010.06.01].

Wow. You'd think Bachmann had traded in her tea bags to become a card-carrying Chavez socialist.

Or maybe she's been hanging out with one of my favorite leftist intellectuals, former Labor Secretary and current Berkeley prof Robert Reich, who argues we should put BP in receivership. Likening the oil blowout to a nuclear meltdown, Reich says it's madness to leave fixing such an enormous disaster in the hands of a private corporation, which is ultimately answerable not to the public good it is wrecking but strictly to its shareholders. Reich says temporary receivership leaves all the expertise and equipment in place but guarantees that we can get the truth about what's happening and act in the public interest.

Reich backs his argument with analysis from an oil engineer who says (in Reich's words) "BP is doing the minimum to clean up the oil and everything it can to protect its bottom line." The engineer says BP should stop using dispersants (they just add more poison to the ecosystem), restart work on a second relief well, and send every tanker they have to slurp up oil from the gusher rather than continuing their profit-making runs from other stable wells.

Conservatives are realizing they can only take their Grover-Norquist act so far. As Louisiana Governor Bobby Jindal recognizes, "We need our federal government exactly for this kind of crisis."

When teabaggers and the rational Dr. Reich can agree, maybe it is time to act. Nationalize BP, at least for as long as it takes to plug the well and clean up the Gulf.

No More "Too Big to Fail": Cap Bank Assets at $100 Billion

Troy Jones, Bill Fleming, and I are working on building some consensus toward serious, effective financial reform. The Senate Ag Committee, community banks, and I maintain that regulating derivatives is a key part of that reform. And if, as finance professional Jones contends, derivatives are too complicated for most people to understand, that strikes me as all the more reason we should restore some stiff regulations on them.

But just like our Republican and Democratic counterparts in the Senate, Troy and I may be a lot closer to agreement on financial reform. Jones wants to break up the megabanks so no one is "too big to fail." I'm all about that idea. So is Robert Reich, who lists these three big things the pending financial reform bill really really needs to do:

1. Require that trading of all derivatives be done on open exchanges where parties have to disclose what they’re buying and selling and have enough capital to pay up if their bets go wrong. The exception in the current bill for so-called “unique” derivatives opens up a loophole big enough for bankers to drive their Ferrari’s through.

2. Resurrect the Glass-Steagall Act in its entirety so commercial banks are separated from investment banks. The current bill doesn’t go nearly far enough. Commercial banks should take deposits and lend money. Investment banks should be limited to the casino we call the stock market, helping companies issue new issues and making bets. Nothing good comes of mixing the two. We learned this after the Great Crash of 1929, and then forgot it in 1999 when Congress allowed financial supermarkets to do both.

3. Cap the size of big banks at $100 billion in assets. The current bill doesn’t limit the size of banks at all. It creates a process for winding down the operations of any bank that gets into trouble. But if several big banks are threatened, as they were when the housing bubble burst, their failure would pose a risk to the whole financial system, and Congress and the Fed would surely have to bail them out. The only way to ensure no bank is too big to fail is to make sure no bank is too big, period. Nobody has been able to show any scale efficiencies over $100 billion in assets, so that should be the limit [Robert Reich, "A Short Citizen's Guide to Reforming Wall Street," blog, 2010.04.20].

Now if we can get Congress to listen to a bipartisan coalition of Troy Jones and Robert Reich, we've got a winner of a bill!

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Read more!

• Mr. Jones forwards this NYT article noting growing support among Dems and the GOP for breaking up banks. It also notes that, since the 2008 credit collapse, our policies have made the banks that are too big to fail even bigger. The six biggest banks—Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley—now have assets equal to 63% of the U.S. GDP, compared to 17% back in 1995.
• Jones also forwards this fruitful series of NYT essays from some folks with serious econ chops on what's missing from the financial reform bill.
• Robert Reich also notes that Senator Dodd's bill does go the wrong direction, giving big banks even more advantages over small banks. Let's fix that! Remember: community banks are the best place for your business!
  

Robert Reich: Don't Worry, Be Happy... and Bring Back the WPA

Those of you conservatives who just woke up from eight years of Bush-induced deficit-opposition deficit disorder (and those rare birds among you who consistently criticize deficits even when there aren't Dems in the White House) should read Robert Reich's call for more, not less, federal spending:

Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.

Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt [Robert Reich, "The Truth About Jobs That No One Wants to Tell You," Robert Reich's Blog, 2009.10.01].

But can we really get by with spending for the moment and not thinking about the future? What about our grandkids?

Reich is not just whistling happy tunes. Reich is pointedly mindful of future generations, and he offers an empirical example to show more spending could be the best thing we can do for them:

When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn’t even know what a debt was, but it kept me up at night.

My father was right about a lot of things, but he was wrong about this. America paid down FDR’s debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.

I know a trillion-dollar deficit is a big scary thing. It's easy to pin all your fears of that man in the White House on that one overwhelming number and the easy rallying cry of "What about our children?!" I'm even willing to entertain serious suggestions to eliminate the deficit and the debt by shutting down Medicare, Medicaid, and the military... which is what you'd have to do, for ten years, to pay off the national debt. (Feel free to peruse the federal budget and come up with your own debt-elimination strategy.) Who needs jobs and economic growth, right?

But if you accept the premise that economic recovery is essential to the fiscal viability of the government (not to mention pills for Grandma and bullets for G.I. Joe), you need to put down your signs, get on board with Reich, and let the government do what the private sector apparently cannot.

Sleep Well, Says Robert Reich: Deficit No Big Deal

Worried the deficit is too big? Robert Reich (no ignorant fellow) says don't worry, it's nothing:

Second, deficits and debts mean just about nothing anyway -- at least out of context. In 1945, the federal debt was 120 percent of the entire U.S. economy. Yeegads! Yet only a few years later, the debt as a proportion of GDP had been tamed -- and not primarily because of cuts in government spending. Yes, of course, wartime spending ended. But the big change was in the denominator of the equation. Economic growth kicked in big time, and reduced the debt as a proportion of the economy to manageable levels [Robert Reich, "Don't Succumb to Deficit Hysteria," Robert Reich's Blog, 2009.08.25].

As a matter of fact, Reich actually thinks the deficit needs to be bigger. I kid you not: with the economy still sluggish, Reich says we need to pour on more government spending to get people back to work. Uff da! Sing yourself to sleep with that one, and tell me what you think in the morning!

Reich: Public Option Is "Last Stand" for Real Reform

I've argued hard here (and here, here, and here) for a public option health insurance plan (and 77% of my readers and a similar percentage of Madison residents and the American public back me). I've been willing to accept that as a compromise down from the ideal single-payer system. Now the Obama Administration is signaling it's willing to bail from even that reasonable compromise.

Howard Dean says a public option is a sine qua non of health coverage reform. I'll let Robert Reich carry the argument further:

Without a public, Medicare-like option, health care reform is a bandaid for a system in critical condition. There's no way to push private insurers to become more efficient and provide better value to Americans without being forced to compete with a public option. And there's no way to get overall health-care costs down without a public option that has the authority and scale to negotiate lower costs with pharmaceutical companies, doctors, hospitals, and other providers -- thereby opening the way for private insurers to do the same.

It's been clear from the start that the private insurers and other parts of the medical-industrial complex have hated the idea of the public option, for precisely these reasons. A public option would cut deeply into their current profits. That's why they've been willing to spend a fortune on lobbyists, threaten and intimidate legislators and ordinary Americans, and even rattle Obama's cage to the point where the Administration is about to give up on it [Robert Reich, "The Public Option's Last Stand, and the Public's," Robert Reich's Blog, 2009.08.17].

And what of the non-profit health cooperatives being suggested as a sufficiently tolerable alternative that could pass the Senate?

Senator Kent Conrad's ersatz public option -- his regional "cooperatives" -- won't have the scale or authority to do what a public option would do. That's why some Republicans say they could buy it. What's Conrad's response? "The fact of the matter is there are not the votes in the United States Senate for a public option. There never have been," he tells "FOX News Sunday." Conrad is wrong. If Obama tells Senate Democrats he will not sign a healthcare reform bill without a public option, there will be enough votes in the United States Senate for a public option [Reich 2009.08.17].

President Obama should not have to compromise to appease opponents who are willing to use any means necessary, including manufactured rage and outright deceit, to protect a broken status quo. It's time to stand for what's right, not what polls well with lobbyists. Let's push that House vote on single-payer. Let's show just how much support there is for real health coverage reform. And let's make clear that the public option is the rock-bottom compromise position.

Mr. Obama, we did not elect you to give in to willful deceit and ignorance. Spend that political capital, fight for the public option.

(Besides, how will the Republican cries of "Socialism!" and "Tyranny!" stick if you don't create the one big government program that scares them the most? ;-) )

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Update 13:20 CDT: But I agree with Ned Hodgman of Understanding Government that President Obama at least deserves credit for making a case that puts facts and sensible policy above emotion and identity politics.

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Update 17:00 CDT: As I suspected, compromise on public option is pointless, since it won't win over Republicans anyway.

Can You Get Your Hands Dirty in the Global Economy?

Here are a couple of articles to read side by side. First, last Sunday's New York Times Magazine runs a remarkable essay by Matthew B. Crawford. I should say Dr. Crawford: the author has a Ph. D. in political philosophy from the august University of Chicago. Dr. Crawford's current occupation: he fixes motorcycles. Between Hondas and Harleys, Crawford has managed to write a book, Shop Class as Soul Craft: An Inquiry into the Value of Work. The NYT essay distills the main ideas of the book:

• Modern "knowledge work" can be more nervating than liberating.
• Working with one's hands is wrongfully viewed as a sacrifice, a last resort, and a waste of talent.
• A successful motorcycle mechanic is every bit a scientist and scholar, engaging in at least as much complex thinking, problem-solving, ethical reasoning, and social intelligence as any academic in a university lab or library.
  
• Shop work has more genuine utility, integrity, and fun than a lot of cubicle jobs.

Among my favorite lines from Crawford is this observation: "There probably aren't many jobs that can be reduced to rule-following and still be done well." Think Big Macs: no McDonald's employee makes a great Big Mac. Big Mac production is a matter of pushing buttons and responding to timers as dictated by rigorously established standardized procedures. Or think the classroom: those situations where teachers and students are citing and following step-by-step lesson plans or policy manuals are likely the moments when the least genuine learning and personal engagement are happening. The best learning happens when we engage in vigorous conversation and exploration that defies that guidance of written rules.

Crawford also offers this observation about what constitutes a good job:

A good job requires a field of action where you can put your best capacities to work and see an effect in the world. Academic credentials do not guarantee this.

Nor can big business or big government — those idols of the right and the left — reliably secure such work for us. Everyone is rightly concerned about economic growth on the one hand or unemployment and wages on the other, but the character of work doesn’t figure much in political debate. Labor unions address important concerns like workplace safety and family leave, and management looks for greater efficiency, but on the nature of the job itself, the dominant political and economic paradigms are mute. Yet work forms us, and deforms us, with broad public consequences [Matthew B. Crawford, "The Case for Working with Your Hands," New York Times Magazine, 2009.05.24].

Crawford pegs where I experience the disconnect with my Madison neighbors who think landing a call center would be a step up for our town. We want more jobs, steady wages, and good benefits, but we don't have a lot of conversations about the work itself. Forget the paycheck and perks: does your work itself make your soul healthy? Does it help your neighbors? Does it serve your god(s)? How often do we ask those questions... and how often do we instead just shut those questions out of our minds for 8 hours a day?

Crawford sees the economy driving more people to spend their money on repairing what they have rather than just buying more new junk. He is hopeful that the sternly shaken economy will free more people to pursue jobs more oriented to their true callings, whether for management or mechanics.

Perhaps motorcycle repair shops will fare well, but Robert Reich's most recent online essay argues that a lot of other physical jobs are gone for good. The former Labor Secretary argues that trying to save manufacturing jobs at GM and elsewhere is a fool's errand. Productivity gains have caused declines in manufacturing jobs everywhere. Percentage-wise, Japan, Brazil, and our main nemesis China have lost more such jobs than the U.S. has. Machines and computers mean we just don't need as many people to build things any more.

You should be nervous anytime you hear "don't need" and "people" that close together. But Reich says it's inevitable, and we should accept it, just as we did in farming (30% of Americans worked to produce food a hundred years ago; now less than 5% do). Reich lists a number of jobs that technology has replaced and is replacing: elevator operators, telephone operators, bank tellers, gas station attendants, store check-out clerks, travel agents, real estate brokers, stock brokers, and accountants.

Reich says routine jobs—all those jobs Crawford mentioned that can be reduced to rule-following—are disappearing. So what's left for human workers?

A growing percent of every consumer dollar goes to people who analyze, manipulate, innovate and create. These people are responsible for research and development, design and engineering. Or for high-level sales, marketing and advertising. They're composers, writers and producers. They're lawyers, journalists, doctors and management consultants. I call this "symbolic analytic" work because most of it has to do with analyzing, manipulating and communicating through numbers, shapes, words, ideas [Robert Reich, "The Future of Manufacturing, GM, and American Workers (Part I)," Robert Reich's Blog, 2009.05.29].

That's great news for idea-guys like me. If I were my dad, I'd be nervous. My dad was a mechanic in the Army. He has worked for Morrell's, built and painted houses, and now mans an assembly line making plastic widgets at PPD. He hates computers, I think because they have no moving parts, nothing a guy can just look at and understand. But where I spend half an hour using a spreadsheet and trigonometry to figure out the lengths for studs on a shed with an angled roof, he drops a line and cuts.

My intelligence is symbolic-analytic. Dad's is physical-mechanical. His intelligence is every bit as good as mine, and a heck of a lot more useful when we want to dig a basement or fix the mower. But the economy Reich describes favors my intelligence over Dad's intelligence.

Or does it? Are workers spinning the same bolts in the same holes a thousand times a day really using their physical-mechanical intelligence the same way Crawford does in his motorcycle shop? The routine jobs to which Reich says good riddance are mostly mindless; clear them away, and we free those workers—or challenge those workers—to do work that uses their bodies and minds more fully for jobs that mass-production robots can't do, like fixing motorcycles, building houses, or operating a skid-steer.

My dad doesn't have to worry: he's close to retiring. But what about workers like him, for whom a cubicle job would be a spirit-damaging waste of talent? If manufacturing disappears, do we have enough work—not just jobs, not just excuses for paychecks, but real dignified and dignifying work for every one of our neighbors?

Work that gets our hands dirty is important. It allows us to connect mind and body with the physical reality around us, not to mention with the neighbor who needs a motor fixed or a leaky toilet replaced. We need to remember that working with things requires as much knowledge as the vaunted "knowledge work" the academy and economy celebrate. Even if we embrace the economic realities Reich discusses, we must also keep in mind Crawford's message about the value of work as something that builds not just GDP but souls and communities.

Save Capitalism: Liquidate Bad Banks and AIG...

...or send in the IRS!

I've argued before that "too big to fail" means too big, period. A much smarter man than I, Robert Reich, puts that argument in a good capitalist context:

This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that's "too big to fail" and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government [Robert Reich, "The Real Scandal of AIG," Robert Reich's Blog, 2009.03.14].

In another post, Reich advocates liquidating "irrevocably insolvent banks" and putting AIG out of its (and our) suffering. Representative Stephanie Herseth Sandlin appears to be reading Reich: she calls for liquidating AIG and refunding whatever we can salvage to taxpayers.

If Washington can't find the courage to dish out those just capitalist desserts, might I recommend a more conventional solution? If we want those AIG bonuses back, send in the IRS. Move AIG, Citigroup, Goldman Sachs, Merrill Lynch, and other recipients of federal bailout money to the top of the audit list. I'll bet we could recoup those 165-million-dollar bonuses in no time... and then some.

Capitalism requires accountability to the rules of the market and the rules of the state that makes that market possible. Nationalizing, liquidating, or even auditing the heck out of AIG, Citigroup, et al. wouldn't establish socialism. Such actions would actually re-establish capitalism.

Besides, a nice legal audit or liquidation is eminently preferable to this Greek "solution."

Robert Reich Recommends Economic Stimulus Target Infrastructure...

...and China does it!

I've been wary of the rising talk of the need for another economic stimulus package. Lots of folks behaved sensibly and used that first batch of free money from Uncle Sam last spring to pay off debts or actually boost their savings. Unfortunately, such rational behavior doesn't do much good in an economy based on irrational and excessive consumer spending. Thus, the spring stimulus didn't save us (or John McCain's candidacy) from economic crisis. With more job losses, folks are even more inclined to take any stimulus checks and save them to ride out whatever trouble may be coming rather than spending them on consumer goods. Another round of tax rebates or tax cuts would likely miss the mark as badly as the first round.

So what can we do to jump start the economy? One of my favorite eggheads, Robert Reich, says pour on the stimulus—$600–$700 billion worth—but don't give it to folks to buy Big Macs and Wal-Mart junk. Pour it into something that will last: infrastructure!

The answer to the second question [what to spend the stimulus on] is mostly "infrastructure" -- repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future. (Important qualification: To do this correctly and avoid pork, the federal government will need to have a capital budget that lists infrastructure projects in order of priority of public need.)

Government should also spend on health care and child care. These expenditures are also double whammies: they, too, create lots of jobs, and they fulfill vital public needs [Robert Reich, "The Mini-Depression and the Maximum Strength Remedy," TPM Café, 2008.11.09.

Guess who else thinks that kind of economic stimulus is a bang-up idea: China. They still have 9% economic growth, but they're not waiting to follow America down the recession crapper. China plans to pump $586 billion into ten areas: low-cost housing, rural infrastructure, new railways, new roads, new airports, health, education, environmental protection, high technology, and disaster recovery projects.

Reich says such a stimulus package will actually cut deficits by putting people to work and "moving the economy to fuller capacity." He also says putting Americans to work will do much more good than just handing them money to spend on doodads made mostly overseas.

Put people to work, build things we really need, and take care of kids and the sick to boot. Sounds like a plan to me! I hope China finds that the Robert Reich stimulus plan works... and I hope, if America has to try another stimulus package, that we follow the same plan.

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Update 16:15: Nobel laureate Paul Krugman argues that FDR's short-term economic stimulus efforts during the Depression floundered not because they were too bold, but because they were not bold enough. Krugman's advice to Obama: "figure out how much help they think the economy needs, then add 50 percent." Gulp!

Krugman also gives this quote from Rahm Emanuel: "You don’t ever want a crisis to go to waste."