I suspect I’m not the only nerd who loves The Man in the High Castle or The Plot Against America. Generally, these are billed as ‘What if the Nazi’s had won the war?” stories. It’s telling that both novels start with the premise of no FDR, and thus no New Deal, as the starting point. In the wake of this manufactured ‘debt crisis’, and the policies our country was just extorted into by the most reactionary sliver of society, I’m re-reading them both.
Welcome to the Old Deal—a world where FDR never was.
To understand the core idiocy of what just happened, we must take a moment to understand why the economy has not recovered from the 2008 (real) crisis.
In the three decades since conservative republican economic policies have reigned in the United States, wages of workers—just about anyone who does anything of value, from sweeping floors to surgery—have barely increased. (In real dollar terms, adjusting for inflation.) At the same time, worker productivity—the value of the work each useful person can do—has dramatically increased. A split emerged—between what our society could produce (productivity) and consume (wages).1
For some time, this split was covered by debt. Most of us simply continued to make up the gap between what our wages afforded us, and what we reasonably could consider our share of the nation’s production, by borrowing money. Since 2008, credit and the willingness to continue to borrow on the part of ‘consumers’ (you and I, and everyone you know) has dried up. This gap, hidden before, now is apparent.
Recessions, and depressions, happen when an economy’s productive capacity is greater than its demand. Putting this even more directly: It’s been so long since anyone who works for a living has gotten their fare share of the fruits of their labor, there is not enough spending money in the private sector to buy everything we can make. In its place, we have created massive idle wealth. Our situation today is quite analogous to our situation in the late 1920’s, early 1930s—immediately pre-New Deal
There is a solution, as old as FDR: If the people don’t have money to spent, and labor to spare, the government should hire them and put them to work. The best way would be by tapping into all that idle wealth—by taxing the ultra wealthy. If that isn’t politically feasible, the next best thing is for the government to borrow money (from the cowardly idle wealth) to hire the idle workers. This is the most basic—and well proven—concept in macroeconomics: During an economic crisis, when the private sector fails to keep up demand, the government must step in and put people to work.
The New Deal, and FDR, was just this. Tax the wealthy, borrow money, hire workers idled the flailing private sector and match demand to productivity. It worked, and set the United States into a leadership position in the world. The Marshall Plan (post WWII) was essentially the same game plan, and set up long lasting peace and prosperity in Europe.
The lunatics that manufactured this (fake) 2011 debt crisis don’t believe this. Against all logic, all evidence, and our own recent history, the Tea Party (aka neo-Hooverites) have forced us to cut, drastically, governmental spending right as the private sector continues to flail aimlessly. It’s a recipe for a disaster—ripped right from the pages of some of the darkest SciFi novels ever written. Enjoy your ringside seat.
1. Really think about this. Since 1980, wages in real dollar terms have barely increased. Put another way: The fruits of the entire personal computer and internet industries have entirely gone into the pockets of a superwealthy, super idle elite. Nuts.
Holy fuck. Is the left wing so in love with growth in government spending (that’s all that was cut) that it thinks even the slightest reduction in it will lead to the apocalypse? You do realize that the wealthy are already paying their share and a lot more right? You do realize that 45% of income earners in your country pay nothing tight?
The idea that the average person is no better off then they were back in the 1980’s is complete horseshit.
“Welcome to the Old Deal—a world where FDR never was”
Unfortunately that evil can’t be undone. Once you create a class of people dependant on the government for their survival, the truly idle as opposed to the wealthy who earned idleness, you destroy democracy.
But thanks for the germ of pleasant dreams, Golob. A world without that odious traitor FDR….
A small correction: while Herbert Hoover initially responded to the stock market crash with a laissez-faire policy (his Treasury secretary infamously advised business to liquidate everything, incuding jobs), by 1932 he actually had started a lot of “pump-priming”; FDR actually ran in 1932 as a deficit hawk. But once he was in office, he adopted and expanded Hoover’s policies as the New Deal. And, of course, WWII was the biggest Keynesian stimulus ever.
Holy fuck do you ever need a good editor/proof-reader. Jesus.
BTW, I won’t use the honorific ‘Doctor’ in this context for you, Golob. Were you discussing something of which you had even the faintest hint of knowledge, like your medical practice, I might. But you clearly don’t understand economics at all, nor is it related to the field in which you worked very hard to obtain a doctorate you misuse by preaching against the 2nd Amendment to your patients.
No. Just more of the same liberal claptrap. ‘We have to borrow money when we don’t have any money because being deeply in debt, destroying our credit and the dollar, and trashing the Constitution will make tax receipts higher in some way we can’t describe and pay off all our debt!’
Idiots.
@3
So…you think we should start a massive world war to rebuild our economy?
Touch of overkill, perhaps?
@ both of the idiot comments that came before me – The wealthy are paying nowhere near the share they ought to, and even those who don’t pay income taxes pay property and sales taxes, so the notion that “45% of income earners pay nothing” is horseshit. The overall tax system has become somewhat regressive, with the super rich paying a lower share of their income overall than most workers. The notion that the wealthy have “earned” the ridiculous sums they own and that they are being victimized by being made to pony up to support the society whose conditions allowed them to prosper is not true. The entrepreneur sets up the structure of production, but it’s workers who do the work. The entrepreneur should be compensated, sure, but if he’s allowed to set his own pay he will pay himself far more than he is really worth. No one ever became really, really rich just by working hard. Hard work may get you into the middle class, but the only way to get really wealthy is to set up a system that allows you to steal from a whole bunch of other people. If you are a working stiff, your employer is draining far more money from you than people on welfare ever could… something like $12,000 a year, in fact.
Yeah, they are both interesting and good reads. They have nothing to do with your tangental thinking.
Equating the Marshall Plan to the New Deal as pretty much the same thing in a different place, tells everyone how little you know about the subjects you are posting on.
What’s gonna happen if we tax the rich? Are people going to stop wanting to be rich?
The recent mess in Congress had nothing to do with the Tea Party manufacturers (i.e., the corporations who started the economic crisis) not “believing” anything. Their CEOs benefitted from the economic crisis because their corporations were bailed out at the same time they made billions personally, and they recently were able to screw down government a bit more (and will do more of that in the near future). They have no need to either believe or disbelieve anything. They are about making money, nothing else. The private sector is not flailing; they are holding onto their money by not making jobs, which is what they intended.
Our economy is so efficient that it doesn’t need us any more.
Thank you for the well-written and thoughtful essay, JG. It has been my belief that, given the current political climate, 2008 will be the year that historians point to as the beginning of the end of the United States.
Doc Golob, this troll thread might just eclipse Charles Mudede’s earlier post. Well done.
I mean, it’s a very good point, but it’s also bringing in the trollbait, hook line and sinker.
@2: So now when the government pays people to work on public infrastructure projects, it’s encouraging idleness?
@5: Yes, I suppose you are a revered and eminently qualified political scientist, economist, and historian, right?
Thanks for posting, Jonathan. Now if you can manage to get nearly everyone else who posts on Slog from blindly sucking on Obama’s Hooveresque cock, we might be able to really get the ball rolling here. Obama not only let this happen, he wanted it to happen. He could’ve issued the trillion dollar platinum coins, he could’ve used the 14th Amendment, but HE chose not to. The Tea Party backed Obama into a corner he wanted to be in.
Spot on explanation. Well done.
Oh Seattleblah, don’t you have some destructive parenting to inflict on your theoretical children? Or something inane to prattle on about regarding that silly imaginary boat? Why do you insist on deriding our greatest President? Is it because He was born into the class that you can only feebly aspire to? Green is not your color, dear – I’m sure you have a better nature somewhere that you can aspire to….
Wow, the psychos just jumped right on this.
Did you fuckers not have grandparents? Or maybe parents, since you sound kinda old? Because mine are old enough to remember that there was a time when there were just flat-out fewer jobs than there were people. Employers could not pay. All your free market fundamentalist shit doesn’t count for much when there is simply not enough money to put food on the table no matter how earnest and hardworking you might be.
But you don’t care, do you? You’ve actually been so completely taken in that you are incapable of understanding that your political zealotry makes people starve. You really, honestly think that the right to grab and hold every last scrap of private property you can hoard trumps every single other possible human value. If people can’t live up to your Randian ideals, they deserve to starve on a streetcorner.
Sickening.
Thanks JG. Well put.
(And don’t let the trolls and morons get you down!)
Cerne, you are a blind lunatic spreading poisonous ideas that you will never take responsibility for. You are a despicable thug. I bet you punch little girls. Get help and/or go to hell.
@1, I’m not sure where that idea that “45% pay nothing” came from, but it’s not true. It’s not even close to true.
What is true is that the feds are taking in the lowest percentage of GDP since BEFORE WWII — BEFORE THE US HAD A MODERN TECHNICAL INDUSTRIAL ECONOMY.
By rights President Obama is the biggest tax-cutter in history, because he’s presided over an unprecedented collapse in revenue. Spending? Spending’s a little on the high side, because of the stimulus, but nowhere near enough to actually stimulate anything. What is ahistorical is the gap between the two. And it is completely obvious to anyone with a brain where that gap has to be filled: taxes on the top earners. No reasonable person disputes this.
What is happening with all that money is called a liquidity trap. There’s plenty of money to invest but nothing to invest it in, because there’s nothing that capital sees of interest. The economy is suffocating itself. And if the government doesn’t step in — like every successful capitalist government in history has stepped in — the whole thing is going down the tubes.
What’s going to happen as a short-term effect is, Obama’s going to lose in 2012. Romney will take over, and WHOOSH all that talk about debt and debt ceilings and deficits and taxes and everything else is going to cease, like it always does when Republicans are in the White House. No one is going to say a word about it, and we’ll be right back in the middle of “deficits don’t matter”.
And then Romney will be forced to issue a stimulus plan, just like every economist in the world has been saying. Conservatives know this; liberals know this. The only people who don’t are kooks who couldn’t run a backyard picnic let alone the world’s largest economy.
And like David said, thanks for a great post, Mr. Golub. Do psychology or sociology offer hope of a cure for the brain-broken chimps and chumps of the Tea Party?
JG: As with any debt-financed investment, borrowing by the federal government only works if the return is greater than the interest cost. The problem with most consumers over the past years is that they borrowed money to spend at Old Navy, Louis Vuitton and Starbucks. Now those “investments” are producing no returns. If the Federal Government borrowed money to invest in education and infrastructure, that might make sense. But instead, we tend to borrow money to “invest” in subsidies for high-fructose corn syrup and to fight wars in the Middle East. Not so smart.
@1: As others have pointed out, you are leaving out Social Security, Medicare, etc. Unless you don’t consider those to be taxes?
@2: All people are dependent upon government for their survival. Did you never read your Hobbes? Or maybe you’d like to live without police protection? Guns, ammo and canned food may buy survival for awhile, but not a really great quality of life. Think about it.
@5:If you think borrowing money per se is stupid and cannot possibly be productive, then, well, I guess you don’t have much future in banking, as a home owner, or in a capitalist society.
Echoing what @7 said: Why should hedge fund managers have a top marginal tax rate of 15% on their earnings, while those of us who earn wages have a top marginal tax rate of 28%? Could it be because the billionaire hedge fund managers own the Republican Party?
I think it’s instructive to see that even thoughtful conservatives — a dying breed, but they still exist — are saying things like
That’s David Frum, noted Communist — er, excuse me, hard-right George W. Bush aide.
@6, your “start a world war” comment would be funny if it wasn’t so breathtakingly stupid. Remember, just recently, your guy DID start a world war, or so the ideologues on the far right continue to refer to it, against “Muslim terrorism”, in Afghanistan and Iraq. Remember? The blood of more than six thousand US dead, more than two trillion dollars poured out onto the sand? And counting? For nothing? For wars we are CERTAIN TO LOSE? Good going, there. Butcher.
I just streamed Slaughterhouse Five from Netflix.
What a great movie…moves so fast.
To elaborate…we’re all in the Hansen Economy right now.
Look it up.
Roosevelt was a traitor—to his class, at least in the eyes of those who thought that this country were basically there for that class alone, a sentiment which unfortunately many outside it shared, either out of suck-up-edness or bad religion.
Believing that he betrayed his oath to the Constitution is dependent on so narrow a view of that document that (for example) Jefferson would also have to be accounted a traitor, and bespeaks someone who thinks that ‘reserved’ means ‘reserved solely’, which it never did.
And if he were a traitor, what did that make St Reagan, who revered the man, and felt that he had not come not to destroy his work, but to fulfill it (as unreal as that may seem to many of us).
I thought Iron Giant Bender crushed Hansen during their concert in Central Park.
With regard to corporate taxes right wingers are pleased to say, “corporations don’t pay taxes they just pass the cost along to their customers.” Yet they continue this nonsense about 45% of the people don’t pay taxes. Do they really think that 45% of the people in this country never buy anything from a corporation?
Thank YOU, Doctor G…. dark sci fi, indeed.
We have these “free market” and conservative folks fighting like hell and brimstone against their own best interests. Carrying the water for the wealthy and the selfish.
Hey everyday Americans… we are FOOLS AND STOOGES. The trickle down will NEVER f’ing reach us. Never has. Never will. Can’t change the facts.
We have REAL hurt in the country and the right wing has us all talking about “government overreach”.
WE ARE THE GOVERNMENT. We are in this TOGETHER.
EVIDENCE of the depth of misery in our NEW AMERICA — 15% of Americans are on food stamps. 32% in Alabama. HOLY SHIT this is NOT the time to get Government out of our lives.
TAX CUTS as a stimulus for the wealthy ARE NOT an economic plan. I spent our $450 tax cut on tires and oil change. Did every millionaire put all of theirs back into the economy to create a sparkling land of full employment… UM, NO… what Bullshit.
we got tax cuts and war. how about we try taxing the rich and no war. BET IT WORKS.
Congrats on Slog…the radical Nazi right wing of the United States has really started to take over the comment section!!
Where the HELL are “Original Andrew” ” Mr. Poe” and “Original Monique” these days?
@29, pssst, all those “right wing” posters are the same troll.
@30: Thank you for improving the quality of this thread.
OH WAIT, IT’S JUST YOUR USUAL BULLSHIT AGAIN. Your idea that it’s all just one guy is just a theory (a geuss).
I agree my cost of living allowance is stagnant so I’ve decreased spending, plus I work longer hours with less time off. Back in the 50’s and 60’s it took one wage earning to support a family of 4-6 now it takes two to support a family of one!!!
A strong, secure middle class does not exist in a laissez-faire economy. It never has and never will. This conservative nonesense of being a tax cut away from utopia is pure bullshit. Thanks to democracy, we can use the power of government to make wages keep up with the cost of being middle class, and allow people to lead first-world lives. Or not, and continue our course toward underdevelopment and less opportunities for subsequent generations.
The concept that most people don’t pay any tax is utter bullshit and pisses me off. Ever heard of FICA? It amounts to over 15% of any wages.
And what screws the poor even more is that you don’t pay anything on wages over 106k.
It’s an insanely regressive tax.
I totally agree with this article! I haven’t had a cost of living increase for 5 years, yet my hours at work have been increase and vacation time plus sick days have decreased. I’m old enough to remember that in the 50’s and 60’s a one income family could support 4 children…now its takes 2 incomes to support one! The wage difference between ceo’s and workers has grown so much its become obscene! http://www.epi.org/economic_snapshots/en…
Hey, Doc, you could follow this post up with one about how tax cuts haven’t created as many jobs as tax hikes on the wealthy. Even Reagan had to raise taxes in order to have a positive job growth by the end of his administrations!
Go ahead, trolls… suck the dicks of your corporate overlords. You will not be rewarded. To them, you are just an object to be screwed, screwed again, and finally discarded when you’re no longer useful.
@17 You noticed that too, huh? The convicted stew in a miasma of their own reactionary, guilt-ridden thought-specks, waiting to spew it back at us the very second we call them on their severe intellectual limitations.
It’s not a coincidence this blogging was written by a science expert. They have a method, not a madness.
We live in a mass economy-money must flow for all sectors; if it is allowed to concentrate too much in specific areas then the flow is impeded. Corporate mergers and acquisitions concentrate money and the vital competition (which keeps pricing at all levels fair) stunts growth and the ability of people to progress with their lives and families.
Corporate minded thinking is all about hoarding and controlling. This is why we have our government. If you wish, think of our government as the biggest corporation and get involved. It’s easy to be cynical, I know I’ve often felt this way, but it is on me to get involved; take a page from the Tea people. Anti-Trust legislation through the years makes it clear that monopolies be busted to ensure fair distribution for the people.
@34
What breathtaking ignorance!
The poor pay sales taxes. They pay a tiny percent of the insane number of taxes business pays in purchasing things. And that’s it. They rarely pay state income taxes and never Federal ones. They suck off the government teat for housing, food, child and medical care, college and the list goes on, and you have the sheer unutterable gall to complain about how taxed they are? These folks are paid to be American citizens, while their neighbors who actually give a damn and try to build a decent life for themselves fork over the cash so that they can.
YOU pay 7.75 percent of your FICA tax. The remaining half your employer pays. For the very poor this is the best investment they’ll have as retirement. (And it’s okay. You could do better, and you could do a bit worse, but it’s safe and it’s a reasonable return on all the money forcibly stolen from you over your working life to pay for your retirement.) God knows they’d never lift a finger to save anything on their own account.
The reason for the cap on income that can be taxed for FICA? Above that level your social security payments, for which you’ve been taxed for your entire working life, are stolen. You don’t get them. Yet the left keeps bringing up this cap as some kind of evil regressive tax.
But hey, keep parroting Thhhhhom Hartman (really buddy, Tom doesn’t have an H unless you’re a pretensious ass….oh) and the rest of the loony left, keep repeating lies if it makes you feel better.
@40
Ummm, you seem short on facts yourself.
Clinton had two things on his side. He inherited Reagan/Bush economy, and he retained sensible pro business economic policies. The fact that he was a criminal is a shame, but no-one is perfect.
Nor was Reagan, or either Bush. Bush raised taxes, for example. Bush 2 spent very stupidly, and involved us in one un-necessary war in Iraq. (Anyone who thinks Afganistan was not justifiable needs their head examined. Or did you guys forget Bin Laden and Sept 11 and all that. Wait, I forgot, for you folks he’s probably a hero in your hatred of this country and what built it.) But Bush 2 was a mediocre president governing from inflexible principle, rather than practicle considerations of his duty to his constituents. And most folks I know said and thought so at the time.
Obama makes all these people look positively austere. The man wants to spend money we haven’t got to destroy a country he couldn’t begin to rebuild. He’s incompetent, out of his depth, completetly unfitted for the office of the presidency.
Well you know what they say “Who is John Galt?” Of course some people just shrug this off.
It is an Article of Faith among Tea Partiers that Roosevelt’s policies extended the Depression. It is one of the things that Must Be True, because otherwise it exposes a fatal, glaring flaw in their economic dogma.
Excellent post, Golob.
It is an Article of Faith among the loony left that Roosevelts policies ended the Depression. No way exists to separate out the effects of WW2 and a host of other socio-economic conditions from his treasonous definitions of Constitutional authority and massive over-spending, but without him they couldn’t believe the errant nonsense they do about economies.
First, the frame of this post is that the President and Democrats “gave in” to TeaBaggers. Stop it. This is just not true. The Democrats, just like the Republicans, are not on your side. Barack Obama proposed the cuts in the social safety net, much of which is a payroll tax that is fully funded for many years to come and if we lift the cap it would last indefinitely. Yet, the damage controllers in the shallow end of the “progressive” pool immediately call out TPers as if they are the villains here. Obama rejected the clean debt ceiling increase because it didn’t have cuts. He is the Tea Party president.
He does more for SeattleBlues’ bullshit cause than any Republican president could’ve dreamed. SB, it’s funny that a tax is viewed as compulsory when it was passed as a law by Congress, which would make it constitutional and you love to say that the standard by which we should live and act. It’s also fun that you claim it’s stolen, when the intention is that it’s returned to the people who put into the fund. Like private insurance, pensions or healthcare, social security is social insurance. We can probably both agree that the bastards who stole from SS to put money in the general fund are despicable but that it’s stolen when it fits within your narrow Constitutionalism (with a capital ‘C’ cuz those founders were so awesome!) is pretty hypocritical.
See what I mean?
@47
And yet, that’s precisely what happened in 2004.
It’s the same cleft stick the far left find themselves in. The kind of anti-American communism you so dearly want, the use of gay ‘rights’ as a hot button issue to divide the country and so on find little response in mainstream Dem politics. But what are your options? Sorry, but it’s Obama or whoever the Republicans end up nominating.
So with Bush. Gore or Kerry were the options. Yes the Patriot Act, Homeland Security Theatre, the war in Iraq were and are bad. But the options were worse. A Gore as president would likely have stalled and stuttered in response to 9-11. A Kerry would have profusely apologized for all the provacation we gave Osama making it necessary.
For the record, the current recession is a bipartisan effort. If we accept that lax regulation of the financial industries played a role, that regulation was in Democrat hands for 2 years or more prior to the recession. Or did you forget about Bawney Fwank? Nor is it either Obamas fault, or particularly reasonable to expect a solution a few years after he took office.
But that’s how voters think. They want a clear target for their fears and anger and frustration, and for better or worse that’s the president.
40
the republican congress handed a balanced budget to Clinton.
The author is exceedingly uninformed in the areas of history and economics. He has, at best, a slight touch of actual understanding of the facts and statistics he cites. Is arguments are based on categorically false notions like “the rich get richer” because that is all he hears in false, biased and incorrect news reports.
The rich get richer is one of the left’s favorite arguments, because the man is totally keeping down maaaaan. Hit that weed a little harder. While the net value of the “top 1%” of the population has indeed grown, the actual rich people do not get richer. In fact, almost every 5 years, nearly 50% of the people in the “rich” category turn over to the “middle class” or “poor” categories and are replaced by people who previously were in the “middle class” or “poor” categories.
Society as a whole cannot “get richer” because as anyone who a basic understanding of economics knows, “there is no such thing as a free lunch”. The wages of “productive people” cannot gain relative to inflation. If they did, inflation would have been higher. That’s the point. If you pay everyone more, you devalue the currency. If the average wage rises, everyone’s value falls to compensate.
It’s like teaching a bunch of children…