Reaganism got us into this mess; will Rooseveltism get us out?

[BurtWorm]

This question, which occurred to me while watching Jim Lehrer ask how Obama and McCain intended to adjust their policies in the wake of the bailout, is raised this week by Ezra Klein and Kevin Drum. If trickle-down is the problem, wouldn't Keynesian spending be the solution? Not just random throwing away money on the wealthy, but quite the opposite: spreading the money out to the majority of the people through social programs. This may not be acceptable to speak about in polite society yet, but let's be real: isn't this exactly what's needed?




http://www.motherjones.com/kevin-drum/2008/10/our_coming_recession.html

OUR COMING RECESSION....Ezra Klein is annoyed with pundits who think we need to cut back on spending programs because we're about to devote $700 billion to bailing out Wall Street:

The underlying presumption here is that during a recession, faced with heavy spending, the president will have to cut his investment agenda. It makes a certain amount of intuitive sense. In hard times, families cut back. But the government is not a household. In hard times, it should spend more in order to stimulate the economy. That's part of the utility of having a government: When consumers and businesses fall on hard times, they cut spending. Which cuts demand. Which cuts economic activity. Which deepens your recession. All that is a bad Thing. So it's useful indeed that we have an institution able to amp up spending in order to increase demand.

....A better question would take Keynesian economics a bit more seriously. Rather than asking what spending the candidates should give up, the question is which items they should prioritize. In theory, you now want to focus on policies that will create a rapid, short-term boost. This might cut towards a tax rebate and against infrastructure development, or towards green investment and away from health reform. But a recession does not cut against government spending. In fact, it does quite the opposite, and it's a real problem that our political system seems content to lazily assume otherwise.

Right. Monetary policy doesn't have much bite left, so fiscal stimulus is our best bet for keeping the coming recession shallow. Unfortunately, one of our biggest problems right now is that we also have a large and growing current account deficit. We consume way more than we produce, and our consumption is financed by the Chinese, the Saudi Arabians, and our other fine overseas friends. This can't go on forever, and if we don't do anything about it ourselves, these fine overseas friends will eventually do something themselves. That would be painful in the extreme.

So here's my question. I don't think any real economist has ever addressed any of the questions I've ever posted on this blog, so I should probably just give up, but here it is anyway: Should we try to stimulate our way out of the coming recession? If so, how much and for how long? Or should we instead concentrate on reducing consumption, boosting exports, and getting our house in order before someone gets it in order for us? Can we somehow do both? Inquiring minds want to know.

[BurtWorm]

1. kick

[Hydra]

2. We should be attacking the problem from the ground up

Namely, jobs and wages, cheap, renewable energy and housing for everyone.

No one is talking about that, though- it's all about how we need access to more debt.

Status quo is making the problem worse- why do we continue with that?

[BurtWorm]

6. I actually have heard Obama talk about shifting the focus of spending from top down

to bottom up. In his debate he talked about that. I wouldn't be too surprised if his economic advisers (one of whom is a good friend of mine) are talking about such a spending program. It's time to dust off the Depression histories and see how they dug their way out of the last foundational crisis.

[femmedem]

3. "Rather than asking what spending the candidates should give up..

the question is which items they should prioritize."

When Obama and Biden were asked which programs or campaign promises they wouldn't be able to follow through on, they answered by talking about what they had to push through regardless of budget restrictions. Keeping families in their homes, employing people to build things we actually need rather than weapons--they didn't sound afraid to channel Roosevelt. :)

[DavidDvorkin]

4. It worked before

Although WWII made the picture murky.

[rhett o rick]

11. See my post #10 below. nm

[Gore1FL]

5. Reaganism is just a fancy name for Hooverism

[tjwash]

7. Well, the 30's depression was caused mainly due to a lack of economic controls.

And just like now, the gulf which separates the wealthy from the working class, continues to widen. The economy back then was barely moving. Tons of small businesses were shut down, and by 1932 I'd guess that about one in four employees was laid off, or in the process of being laid off. Wages tumbled of course, because the ultra-wealthy that still owned everything had a huge pool of labor to choose from now. There was also mass deflation because Americans had little or no money, and there were also thousands of vacant homes available, since many fell into foreclosure.

Any of this sound familiar?

I have to admit, that Roosevelt injecting a little bit of socialism into the economy actually did work in a limited way. His New Deal went way above and beyond any previous legislation. He attempted to contain America's unbridled capitalism to overhaul and stabilize the economy. Hence, the "alphabet soup" programs; the NRA (National Recovery Act not the gun thing), the AAA, TVA, CCC, SEC, HOLC, SSA. It was actually a pretty good way to slowly bring workers back into the work force.


Unfortunately, WWII; while it stimulated the economy and helped bring the nation out of the depression, actually helped unbridled capitalism to remain firmly intact. The middle class got hit with a high rate of unemployment, while the mega-rich still continued to control most of the nation's wealth, as well as its laws and corporations. Roosevelt should be considered a hero, because of all the help that he gave the workers, and for the huge hand he exhibited in helping to pull us out of a very dark time in U.S. history. Nevertheless, the system of inequality remains as strong as ever, as the philosophy of concern for profit over human need has continued on to this day.

So...here we are again. What have we learned from our mistakes?

[ColbertWatcher]

8. Kick for Mother Jones! n/t

[ColbertWatcher]

9. "Should we try to stimulate our way out of the coming recession?" YES YES YES!

Instead of a war-dependent industrial complex, we can finally start serious alternative fuel research and development.

I say stimulate our way out of another GOP-created financial crisis to get us out of the GOP-maintained energy crisis.

[rhett o rick]

10. Times are a different. At the end of the first republican depression, there was enough to go around

There were loads of natural resources. We had manufacturing established that was able to grow. The corporations were national and they needed the middle class worker. Today's corporations are international, no allegiance to this country and they no longer need American workers.

THIS IS A CLASS WAR AND VERY FEW CONGRESS CRITTERS ARE WORKING FOR THE LOWER CLASSES.