Dean Baker: "There is no excuse for the mass suffering the United States is now experiencing"

[Better Believe It]

This Economy Stinks, Yes It Does
By Dean Baker
August 10, 2010

If there were any doubts about the health of the economy, two reports issued in the last ten days should have eliminated them. First the second quarter GDP showed the economy growing at just a 2.4 percent annual rate. Then the Labor Department reported on Friday that the economy created just 12,000 jobs in July after removing the impact of temporary Census employees. Both reports are really bad news about the economy’s near-term prospects.

So, we are sitting here with a moribund recovery that promises to leave tens of millions of people unemployed or underemployed for the indefinite future. And the political options at the moment seem to be between Democrats who tell us things are good and Republicans who say the economy stinks, but don’t have a clue on how to make things better.

Just to be clear, we do know how to make things better, we just lack the political will. Spending money creates jobs. Even Tea Partiers will work for money, in most cases even if the money comes from the government. Unless the private sector somehow will spend less because the government spends more (tell me the loony story, I love fairy tales), then more stimulus will create more jobs.

More stimulus does not have to create a debt burden for our children. The Fed can buy and hold bonds so that the interest is paid to the Fed and refunded to the Treasury. Japan’s central bank has done this and its interest burden is less than ours even though its debt is more than three times as high compared to the size of its economy. And, its main problem continues to be deflation – inflation is nowhere in sight.

The Fed can do more. It can set an inflation target of 3-4 percent. This would give businesses more incentive to invest. (Suppose that they knew all prices would be on average 15 percent higher in five years.) It also would alleviate the debt burden of homeowners by raising their nominal wages and house prices.

Finally, if we can’t boost the economy, we can restructure work. Germany and the Netherlands have both gone the route of work sharing, using unemployment benefits to give firms credits to shorten workweeks rather than layoff workers. The unemployment rate in the Netherlands is hovering near 4.0 percent. In Germany it is 7.1 percent, but that is lower than it was at the start of the downturn.

There is no excuse for the mass suffering the country is now experiencing. The people in charge messed up disastrously. They are still messing up disastrously. The public has every right to be furious at the incredible level of incompetence shown by those in charge. They should demand better.

Read the full article at:

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&...

[enough]

1. I wonder if this will rise above the un-reccer(s) already at work on it. K&R (nt)

[SammyWinstonJack]

3. K&R

[Donnachaidh]

2. kick and Rec! n/t

[BlackHoleSon]

4. The People in Charge

I think the mistake we make about "The people in charge" is the same one we made with Bush - the idea that they are messing up. It seems they are doing exactly what they intend to do, unapologetically, for their own benefit. And they know the public has no taste, or no outlet, for effective pushback.

[emilyg]

43. Welcome to DU.

[Better Believe It]

51. Welcome to DU. I hope you like our discussion boards.

[gratuitous]

5. Oh, Dean Baker! Maybe you need to be drug tested

You should live in the real world where nothing can be done, and things just happen for no reason.

[phantom power]

6. O, will those pernicious professional leftists never stop criticizing?

[kenny blankenship]

7. The excuse is that Democrats have spent nigh on 3 decades boxing themselves into the corner

of doing obeisance to far-right, authoritarian, Capital-is-your-literal-Lord-and-Master economic ideology. And now they can't get out of that box without appearing to contradict and repudiate their previous religious beliefs! They worked so hard to get big donors and independent voters to believe that they sincerely believed the same business-über-alles crap the Republicans championed under Reagan, it's hard not to feel sorry for them now that it falls to them to deal with the devastation that the shared ideology has caused. They did believe it too, as sincerely as they believed in anything. It took a supreme act of will to overcome traditional party identity and the counsel of reason and factual data - but they did it. And just when they had everyone convinced they were as pro-bidness as the Republicans, the whole thing turns out to be a sham and a terminal disease! What a world. Do you know how they had to turn themselves inside out as a party to embrace such dangerous lunacies? Do you know how many traditional constituencies they had to lie to, to slap square in the face - and then ask for money? Do you know how hard it is to sincerely affirm two mutually exclusive propositions at the same time? The Democrats have been through real hardship! Let them cling to their excuses a while longer.

Soon it won't matter who said what in either party. The shit approaches the fan.

[dbt]

14. Required Reading, this!

[BlackHoleSon]

17. Wow!

This post cuts right through it all in a way I haven't seen anyone else quite do in response to the WH's triangulation.
In a way, the liberal base reminds the Party elite of everything they've spent the last 30 years demonizing with their constant Republican ME TOO!!! strategy. We're the old friend they can't even look at because our mere existence reminds them of what a fraud they've become.

[leftstreet]

26. +1

Well said

Welcome to DU!

[XemaSab]

20. word

n/t

[girl gone mad]

21. Good summary.

[Lucky 13]

30. +1

[valerief]

34. No. They were all greedy and spit out conmen spiels to the public. That's all.

Ain't got nuttin' to do wif beliefs. Got everyting t' do wif love o' $$$$.

[bertman]

36. YO, Kenny! That nails it. But, honestly, it's VERY HARD for me to feel

sorry for them. Most of them are ensconced in high-paying jobs with no unemployment problems in their future.

"The shit approaches the fan."




Love it.

[Tuesday Afternoon]

41. rapidly approaching -

few will come away clean.

[piratefish08]

8. Mr Baker, are you some kind of Professional in need of drug testing?

or are you just fucking retarded?

[valerief]

33. He's nothing but a Canadian Healther!!!! AND hippie pacifist!!!! nt

[closeupready]

9. Gibbs: 'if you think things are bad now, remember how bad they used to be.'

'thus, you are better off being slightly less miserable with us.'

[emilyg]

44. Yes - but you promised to

make it better.

[Better Believe It]

46. I don't remember the economy being in worse shape for working people.

Please enlighten me.

[closeupready]

47. Ask Gibbs. That's my point.

Everytime he faces criticism from the Sunday talk shows, he goes, "let's go back to 2008 when we were on the verge of another Great Depression."

[amborin]

10. he also argued TARP was not necessary; so did Reich, just helped banksters....

[Jackpine Radical]

12. Yes, TARP did work, at least temporarily

and very inefficiently. There were other ways that didn't involve allowing the banksters to reward themselves with billions in bonuses for their greed. And it didn't reallhy pay off much in terms of jobs, just in terms of protecting the ultra-rich from the risk of becoming merely very rich.

Like, for example, the money could have been used to directly create WPA-style jobs and to assist people with their mortgages. The effects would have been stronger at less outlay. Where do you think the corporations got the trillion or so that they're sitting on and refusing to invest in useful ways?

[amborin]

13. it worked well for the banksters; here's what Reich said:

"......
Enthusiasm Gap: Michael Bennet Got Fewer Votes Than GOP Loser.
More in Politics: Ken Buck, Tea Party... Ted Stevens Info. Emerges... McCain: Snooki Too Cute... .
Palin-Backed Candidates CONCEDES Georgia Runoff Race For Governor.
POLL: Public Opposes Cutting Social Security To Trim Deficit.
S.C. Gov Mark Sanford Flip-Flops On Stimulus.
The 8 Biggest Winners And Losers Of Primary Night.
Rich Would Still Get Tax Cuts Even If Bush Tax Cuts Expire.
Political Inexperience A Bad Thing? Not In 2010.
Your request is being processed...

Robert Reich.Former Secretary of Labor, Professor at Berkeley
Posted: August 3, 2010 02:27 PM BIO Become a Fan Get Email Alerts Bloggers' Index .



The Origins of the Enthusiasm Gap
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Email Comments 255 Whatever the outcome of the upcoming midterm elections, the activist phase of the Obama administration has likely come to a close. The president may have a fight on his hands even to hold on to what he's already achieved because his legislative successes have been large enough to fuel strong opposition but not big enough to strengthen his support. The result could be disastrous for him and congressional Democrats.

Consider the stimulus package. Although it's difficult to separate the consequences of fiscal and monetary policy, most knowledgeable observers conclude that the stimulus has had a positive effect.

Yet the official rate of unemployment remains above 9%, not including millions either too discouraged to look for work or working part-time when they'd rather have full-time jobs. Almost half of the jobless have been without work for more than six months, a level not seen since the Great Depression.

The central problem continues to be inadequate aggregate demand. The administration's original sin was not spending enough and focusing the stimulus more directly on job creation.

In fairness, no one knew how sick the economy was in February 2009 when Congress approved the initial stimulus. Yet by late spring 2009 the White House knew the extent of the damage and should have pushed much harder for significantly more spending. Almost a third of the initial stimulus, moreover, came in the form of temporary tax cuts, which already had been proven relatively ineffective at spurring demand after President Bush tried them in 2008. And many states were engaging in reverse stimulus policies, slashing spending and increasing taxes. The administration knew its stimulus was not nearly up to the job.

Even so, the initial spending inflamed conservative critics who claimed that it unnecessarily enlarged the federal deficit. And its subsequent apparent failure to reduce unemployment has only added more fuel to the fire. This pattern--big enough to energize adversaries but not enough to tangibly benefit most people or to gain the enthusiastic support of independent voters and the Democratic base--has come to haunt almost every major initiative.

The Troubled Asset Relief Program (TARP) was a clear financial success: It brought Wall Street back from the brink of collapse and in the end will likely cost taxpayers well under $100 billion. Yet in a larger sense, TARP also failed.

The bailout of Wall Street had been sold to the American people, by the Bush and then by the Obama administrations, as a way to revive Main Street and protect homeowners and jobs. But it didn't accomplish these broader goals. Small businesses have had difficulty getting loans. Few homeowners--according to a recent report by the special inspector general for TARP, only 340,000 of the estimated three to four million borrowers who were supposed to receive assistance--have had their mortgage terms permanently modified.

As Wall Street profits rebounded, TARP increasingly looked to many Americans like a giant political payoff. In a poll taken by Hart Associates in September 2009, more than 60% of respondents felt that "large banks" had been helped "a lot" or "a fair amount" by government economic policies, but only 13% felt that the "average working person" had been. TARP has fueled tea party anger on the right, disillusionment on the left, and....."

[Luminous Animal]

16. Proof?

[girl gone mad]

22. All the proof you need that TARP was a complete scam..

rests in the actions of the Fed and the big banks in the weeks following approval of these funds, which were supposedly urgently needed to buy up toxic assets so that banks could resume lending.

[Hannah Bell]

11. kr

[nightrain]

15. wow. knr. thank you for posting this gem!!

Is there the political will to change directions, to improve, to risk? The country needs it...

[hay rick]

18. K&R

[Bluebear]

19. Dean Baker needs drug testing! He never really loved him!

[WillYourVoteBCounted]

23. but all the wealth hasn't be redistributed to the wealthy yet

gotta have more bankruptcies and more job outsourcing first.

[Wilms]

24. .

[SlipperySlope]

25. Bernenke would give eye teeth for inflation.

It doesn't matter what "target" the fed sets for inflation, because the fed is currently powerless to create inflation.

They have basically tried every trick in Ben's famous "Deflation: Making Sure It Doesn't Happen Here" speech - and we still have deleveraging and deflation. They are printing every possible dollar they can get away with legally or illegally, and we still have deleveraging and deflation.

The fed is absolutely desperate to get some degree of inflation going. To a central banker moderate inflation is "normal" and they know how to manage it. But setting a target isn't going to do it.

Come on Ben, where are the helicopters when we need them?

[leftstreet]

27. K&R

[Tsiyu]

28. kick

[xchrom]

29. Recommend

[RainDog]

31. kick n/t

[Starry Messenger]

32. k & r

[ensho]

35. the pentagon holds us back

nt

[bertman]

37. Great post, Better Believe It. Rec. nt

[MissDeeds]

38. K&R n/t

[cate94]

39. K & R

[Gecko6400]

40. OK, I'm a little confused here.

Where does the Fed get the money to buy the Treasury bonds?????????????

[Better Believe It]

50. I believe they can make as much money as they wish.

That's why government "debt" isn't anything like private personal debt.

Unless you have a legal money making printing press in your house.

[The_Casual_Observer]

42. The service, information, real estate, and heathcare "industries" don't cut it

as far as job creation & growth. These economic times are permanent unless
fundamental changes are made to the whole system.

[NJmaverick]

45. That was a complete waste of time

another whine filled rant that offers no real solutions (the vague suggestions simply are unworkable or unpractical), just knocks those in charge

[Gecko6400]

48. You too. I thought it was just me!

[Luciferous]

49. Kick