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Bill Black: Jobs Now – Make Obama’s Priority Reality and Expose the Lie of Lazy Laborers

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By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City

President Obama gave a major speech today on his legislative agenda. He said that the overriding national priority had to be jobs. We agree.

David Brooks published an op ed today calling on the Republican Party to become “The Party of Work.” He put his primary message in his final paragraph for emphasis.

“Don’t get hung up on whether the federal government is 20 percent or 22 percent of G.D.P. Let Democrats be the party of security, defending the 20th-century welfare state. Be the party that celebrates work and inflames enterprise. Use any tool, public or private, to help people transform their lives.”

Other than the gratuitous and inaccurate slap at the Democratic Party, we agree. The problem is that Republicans and Democrats are pushing a “Grand Bargain” that would reduce jobs. (The so-called Grand Bargain would also produce a “Great Betrayal” that would begin the process of shredding the safety net. I have written separately about the betrayal and will be producing additional articles opposing that action. This article focuses on the austerity component of the proposed Grand Bargain.)

The Republican and Democrats are incoherent about austerity. The immediate context for the budgetary discussion is the Congressional Budget Office (CBO) report on the “fiscal cliff.” The fiscal cliff is a misnomer because it is not a cliff. It is a product of the deal made on the debt limit. It would produce (gradual) decreases in spending and tax increases that would begin to take effect in January 2013. The gradual nature of the decreases in spending and the near certainty that any tax reductions Congress make in 2013 will be made retroactive to the beginning of the year combine to mean that the fiscal cliff is a gradual decline into a self-destructive policy of austerity. We have months to prevent the self-destruction.

The CBO, of course, knows Congress very well and knows that there is no fiscal cliff but that there is political advantage to be gained from warning that absent Congressional action there would be a disaster. The CBO deliberately issued its report immediately after the election to attempt to create a sense of Congressional urgency and push the adoption of the Great Betrayal.

The internal inconsistency of relying on the CBO report to adopt austerity should be clear, but is almost entirely ignored by the Beltway types. I spent nearly two hours listening to MSNBC’s midday coverage of the issue without hearing a single journalist, commentator, or politician recognizing the incoherence. The CBO report’s primary thrust is that if Congress took no action during 2013 to reduce the tax and spending austerity measures that begin to take effect in 2013 then the result would be a serious loss of jobs and a gratuitous recession. We agree. The Obama administration says it agrees. The Republicans are indicating that they agree.

Let’s step back and analyze the implications of that paragraph. What follows relies on the views expressed by the proponents of austerity and the Great Betrayal, logic, and coherent economic theory and experience. Virtually everyone powerful inside the Beltway is not saying that they agree that “austerity now” (i.e., prior to achieving economic recovery from the Great Recession) would be a terrible, self-destructive policy. We agree. Keynes has again proven correct. Europe adopted austerity and needlessly and destructively hurled the Eurozone back into recession. We would have to be insane to engage in such financial suicide.

• This means that “austerity yesterday” – earlier in the effort to recover from the Great Recession – would have been even more disastrous. It would have forced the U.S. back into recession and caused a substantial increase in unemployment.

• The U.S. came exceptionally close to adopting austerity in 2011 through the “Great Bargain” negotiated by Speaker of the House Boehner and President Obama. The 2011 version of the Great Bargain would have imposed draconian austerity and begun the Great Betrayal of the safety net. Austerity results from budget cuts and tax increases, and the 2011 Grand Bargain was designed to impose both forms of austerity. Boehner described the massive budget cuts that he and Obama agreed upon in July 2011.

In the ensuing days, the two sides forged common ground on a two-stage strategy for raising the debt limit and cutting more than $4 trillion out of the federal budget through 2021.

Obama said he also put $650 billion in reductions to entitlement programs on the table, along with sharp cuts to government agencies, causing consternation among Democratic lawmakers and forcing him to “take a lot of heat from my party.”

House GOP leaders have repeatedly pulled the plug on efforts to forge agreement on a plan to control the national debt, Obama said. Democratic leaders had been willing to consider provisions that would have caused them considerable political pain among the elderly, unions and the party’s liberal base, he added. He also emphasized his willingness to compromise, noting that “I’ve been left at the altar now a couple of times.”

“This is not a situation where somehow this was the usual food fight between Democrats and Republicans. A lot of Democrats stepped up in ways that were not advantageous politically,” Obama said. He noted that he had offered to make further cuts to Medicare, even after Republicans denounced Democrats in last fall’s midterm campaigns for cutting Medicare as part of their overhaul of the health-care system, saying, “We’ve shown ourselves willing to do the tough stuff on an issue that Republicans ran on.”

• Consider what would have happened in the 2012 elections had Obama struck the Grand Bargain (more accurately, the Great Betrayal) in July 2011. The austerity would have thrown the nation into a gratuitous recession. The CBO says that a far smaller austerity program, delayed by over two years (2013 v. 2011) to a date where the economy is less vulnerable to a renewed recession, would throw the nation back into recession and cause a substantial increase in unemployment. The 2011 Grand Bargain, therefore, would have caused us to fall into a deeper recession and it would have done so more quickly than would the possible tax increases and spending cuts that would phase in during 2013.

• The gratuitous second recession would have begun in late 2011 and deepened during 2012 due to the 2011 Great Betrayal’s austerity provisions. Unemployment would have gone up – and the unemployment rate in July 2011 was 9.1% so the unemployment rate would be well over 10% and would have been increasing throughout election year 2012.

• In addition to the austerity-induced second recession, Obama would have agreed in the Great Betrayal to large cuts in the safety net. He would have adopted the Republican Party’s false claims that the safety net was unsustainable and a grave threat to the nation. This would have made it safe politically for the Republicans to make drastic cuts in the safety net as soon as they controlled the Senate. That is why the faux Grand Bargains are really the Great Betrayals.

• The combination of the second recession, unemployment above 10 percent – and rising – and the Great Betrayal of beginning to unravel the safety net while making severe cuts in government programs that the Democrats strongly support would have caused catastrophic election losses to Democratic Party candidates in 2012. Obama would have lost by huge margins. The Republican Party would have taken control of the Senate and greatly expanded its majority in the House. Obama would have been thrown from office as the Great Failure and the Great Betrayer.

• None of the problems I have described would have been avoided if the Bush tax cuts for the wealthy were repealed. None of the problems come from “unbalanced” austerity (e.g., far more program spending cuts than tax increases) – they come from austerity. Tax fairness is not irrelevant, but a “balanced” system of (net) tax increases combined with program cuts would send the nation back into a recession.

The U.S. could increase taxes on the wealthiest Americans and offset that tax increase with tax reductions to non-wealthy Americans. The most efficient way to do this is to again stop collecting the payroll tax. Workers bear the economic cost of the “employer’s contribution” as well as their own “contribution.” The Social Security tax is our most regressive tax. It has the advantage of putting money in people’s accounts almost immediately. The combination of these factors makes the cessation of collection far more effective in stimulating growth than reducing the marginal income tax rate for the wealthiest Americans. Geithner, however, has indicated that the administration did not wish to resume a policy of waiving collection of the Social Security tax. Waiving the tax has no effect on Social Security payments to beneficiaries or the health of the system. Larry Summers opposed Geithner’s position, but Obama adopted Geithner’s view. Geithner’s view was the bipartisan consensus, proving that beltway blindness remains the norm.

• Guess who insisted on creating the fiscal cliff and ensuring that it had a “trigger” that made it automatic absent a Great Betrayal? That would be Obama – with the full support of the Republicans. Obama insisted on mandating austerity, particularly cuts in Medicaid and Medicare, if austerity failed. That was significantly insane economically and politically. The people who caused the insanity now tell us we must end their insane austerity – by adopting the Great Betrayal and its austerity. “Incoherent” does not begin to capture the incoherence of both parties on austerity. The same Washington Post story cited above explains the setting of the 2011 decision to create the fiscal cliff.
“Another major concession: [Boehner’s] offer had proposed boosting the debt ceiling just high enough to see the Treasury through March [2012], which would become the new deadline for Congress to approve the more difficult cuts to entitlement programs and to overhaul the tax code. The White House vehemently opposed that approach. Obama did not want to have this debate again in an election year. The White House wanted a “trigger” that would automatically raise taxes on the wealthy and cut health spending, an idea the Republicans opposed. For now, Boehner and Cantor agreed to give up their demand for a short-term debt-limit increase. But talks on the trigger would have to continue.”

• The obvious question, except that I haven’t seen anyone ask it, is why Obama and Boehner would agree try to agree to a Great Betrayal that they knew (if you believe them now) would be certain to throw the nation back into recession and begin to unravel the safety net and then when they failed to reach agreement created another austerity program known as the “fiscal cliff.” The obvious answer is that the administration and Boehner were clueless about basic economics.
In a Great Recession, demand is grossly inadequate to employ all the people who wish to and are able to work. If we (net) raise taxes we decrease already inadequate private sector demand. If we cut spending we cut already inadequate public sector demand. In either case we are adopting pro-cyclical fiscal policies that make the recession worse. The administration was warned repeatedly by economists that its stimulus program was vastly too small to counterbalance the horrific reduction in private sector demand caused by the financial crisis, the collapse of the world’s largest financial bubble, and the Great Recession.

Treasury Secretary Geithner, who is not an economist and who has consistently demonstrated that he does not understand economics became Obama’s principal economic advisor. Geithner was a Republican who became an Independent as a fig leaf. He disdained public sector spending, even in response to a Great Recession.

From Zach Goldfarb’s excellent profile of Treasury Secretary Timothy Geithner’s success inside the Obama administration:

The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as [then chairwoman of the Council of Economic Advisers Christina] Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

Wrong, Romer snapped back. Stimulus is an “antibiotic” for a sick economy, she told Geithner. “It’s not giving a child a lollipop.”

In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration.

[I am deliberately relying primarily on articles from the Washington Post because it is hysterically dedicated to creating a “moral panic” about the budget deficit and the national debt. Klein’s article made Geithner’s views about stimulus known throughout the Beltway two months before the July 2011 Obama/Boehner negotiations on the Great Betrayal.]

• The budget deficit is not a “crisis.” The budget deficit is a symptom of the Great Recession. In a severe recession government revenue falls sharply as unemployment grows and causes personal and corporate income, sales, and property values to fall. Demand for government services such as unemployment insurance and food stamps grow. The result is a large, rapidly growing budget deficit. The federal income tax is one of our “automatic stabilizers.” It operates in a counter-cyclical manner (tax revenues fall during periods of strong economic growth and falls during a recession. The automatic stabilizers cause recessions to be less severe and the recovery from recessions prompter. The federal budget deficit is too small. You did not misread that sentence. It is a logical consequence of the CBO’s reasoning in warning in its November 2012 report against the austerity of the “fiscal cliff.” We would have recovered more quickly from the recession if we had increased more substantially our governmental spending and reduced (net) taxes. Both parties’ leaders purport to understand (hence their embrace of the CBO report) the suicidal nature of austerity, but both pander to the electorate by railing at the deficit. It is as dishonest as it is economically illiterate and it has created a massive barrier to getting the public to back rational policies. The U.S. has had much larger deficits (relative to our GDP) during and after World War II. Those deficits allowed us to defeat the Axis powers, recover from the Great Depression, attain full employment, extend the safety net, and achieve robust economic growth without destructive inflation.

• The administration and Boehner are claiming that (a) austerity via the fiscal cliff (which they deliberately created) would cause a national disaster and that, therefore, (b) we need to reach an agreement (the Great Betrayal) with Boehner imposing austerity and beginning to unravel the safety net because austerity is the only way to avoid causing a national disaster. If that seems crazy to you, it’s the Beltway herd that’s crazy, not you.

• Nations cannot determine whether they will run a budget deficit or surplus with any assurance. That is a necessary implication of the CBO report. The two seemingly obvious means to reduce a budget deficit are to increase taxes and cut spending. The Grand Bargain proposes to do both. CBO warns, correctly, that (net) increases in taxes and cuts in spending can reduce already inadequate private sector demand and public sector demand. This can cause (or deepen) a recession and increase unemployment and the size of the deficit. The idea that a nation can mechanically choose to run a budget surplus is an illusion.

• U.S. federal budget deficits and the national debt are not “immoral,” they do not imperil our children and grandchildren, and they do not allow China to control us. The opposite is true now. The opposite is true. When we adopt austerity and throw America into a second recession we cause millions of people to be unemployed. That throws millions of children to fall into poverty and to lose their homes. It causes budget deficits and the national debt to grow dramatically. If you care about children you should oppose the Great Betrayal as the greatest threat to our children. It is immoral to consign our children to the pain of a gratuitous recession or to unravel the safety net that they will need. China has no power over us due to debt. We have no trouble selling our debt at trivial interest rates. Indeed, we do not have to issue debt. The Fed routinely creates money via computer keystrokes.

• It does not require “courage” to adopt austerity and attack the safety net. It requires shameful acts of cowardice in which we cut the programs most needed by those in need in order to benefit wealthy Americans and Wall Street (whose greatest dream is the privatization of Social Security – which would lead to Wall Street making hundreds of billions of dollars in additional fees).

• I watched many hours of MSNBC’s coverage of the fiscal cliff to see how that famously pro-Obama network was covering the proposed Great Betrayal. Only Lawrence O’Donnell (of six MSNBC hosts that I watched), noted that the fiscal cliff is not real. The others treated it as an imminent disaster. Every host, every journalist, and every other guest on the programs supported the Great Betrayal, which they always thought was unambiguously essential.

The full depth of MSNBC’s know-nothing coverage of the issue was reached with Chris Matthews, who opined that what was essential was ignoring Paul Krugman because he was on “the far left.” (Matthews then danced around that label.) At no time did any of the MSNBC hosts ask anyone with economics expertise whether austerity and beginning to unravel the safety net would be harmful or helpful to the nation. The logical incoherence I have explained was never mentioned. The only time an economist was mentioned was Matthews’ fact and logic-free denunciation of Krugman. (Matthews did not explain why Krugman opposed the Grand Bargain.) Matthews’ claim that what was essential was for Congress and the public to ignore a Nobel Laureate in Economics’ warnings that what was being proposed was a bad plan that would harm America. Matthews said that Obama (a lawyer and politician) must tell Krugman, a Nobel Laureate in Economics, that he was going to ignore Krugman’s economics warnings because “I’m President, you’re a columnist.” Matthews has again proved one of our family rules – it is impossible to compete with unintentional self-parody.

Krugman is also an economist with a strong record of predictive success. He is a passionate supporter of the Democratic Party, but his loyalty at all times is to America. Matthews views it as essential that we listen instead to advice from DC journalists, Wall Street, and an administration in which economic policy is made by Geithner – who believes that austerity is dandy and stimulus is candy. But why bring logic, expertise, and a track record of success into a discussion of such a vital issue.

It does not strike anyone at MSNBC as paradoxical that they know that the austerity deal Obama tried to negotiate with Boehner would have caused catastrophic damage to the nation, begun to unravel the safety net, doomed Obama’s re-election chances, and led to the Republicans obtaining control over the Senate in the 2012 election. The MSNBC hosts (other than Lawrence O’Donnell) claim that the deal Obama then struck with the Republicans after his deal with Boehner failed created a “fiscal cliff” that imposes austerity that would cause catastrophic damage to the nation – and that Obama deliberately sought that “trigger” clause. Now, Obama and the MSNBC hosts and their guests think that in order to avoid the self-destructive austerity of the fiscal cliff it is vital that we sign off on a Great Betrayal that will impose disastrous austerity and begin to unravel the safety net. This is so crazed that it is essential to keep people panicked with the same nonsense always used to sell self-destructive austerity – the claim that “there is no alternative.” Those of us (e.g., Krugman) presenting alternatives, alternatives that have proven vastly superior to austerity, must be ignored because journalists like Matthews have no ability to defend why we should be inflicting austerity on the nation and begin to unravel the safety net. Massive majorities of Americans oppose unraveling the safety net.

• The attraction of the Grand Bargain to Obama is fame, as even the Washington Post (which views the Grand Bargain as divine) repeatedly emphasized. Obama knows that even his supporters view the Nobel Peace Prize he received as an embarrassment. He believes that his chance for greatness is reaching a Grand Bargain (Washington Post, emphasis added):

From the White House point of view, those few days [of trying to negotiate the Grand Bargain with Boehner in 2011] show a politically selfless president willing to rise above the partisan fray and make difficult choices for the good of the country — if only obstinate Republicans would meet him halfway.

But interviews with most of the central players in those talks — some of whom were granted anonymity to speak about the secret negotiations — as well as a review of meeting notes, e-mails and the negotiating proposals that changed hands, offer a more complicated picture of the collapse. Obama, nervous about how to defend the emerging agreement to his own Democratic base, upped the ante in a way that made it more difficult for Boehner — already facing long odds — to sell it to his party. Eventually, the president tried to put the original framework back in play, but by then it was too late. The moment of making history had passed.

The actions of Obama and his staff during that period in the summer reflect the grand ambitions and the shortcomings of the president’s first term.

A president who promised to bring the country together, who confidently presented himself as the transformational figure able to make that happen, now had his chance. But, like earlier policy battles, the debt ceiling negotiations revealed a divided figure, a man who remained aloof from a Congress where he once served and that he now needed. He was caught between his own aspirations for historical significance and his inherent political caution. And he was unable to bridge a political divide that had only grown wider since he took office with a promise to change the ways of Washington, underscoring the gulf between the way he campaigned and the way he had governed.

In the end, that brief effort, described by White House officials as the most intense and consequential of Obama’s presidency, not only illuminated pitfalls in the road he had taken during the previous three years but also directed him down a different, harder-edged, more overtly partisan path that is now defining his reelection campaign.

The administration has emphasized the desirability of spending on infrastructure, a very limited jobs program, and green energy programs. Those can all be good programs, but the administration and Boehner should be emphasizing two broader programs. Obama says his top three priorities are: jobs, jobs, and jobs. Republicans say that our nation’s central malady is that we have too many moochers who want benefits without ever having to work. The answer to Obama’s central goal is simultaneously the conclusive refutation to the Republican libels of tens of millions of Americans. Obama needs a real jobs guarantee program for every American able and willing to work. There is no greater waste than leaving over 20 million Americans underemployed. Republicans’ ideological fantasies about the unemployed cannot survive a jobs guarantee program. As millions of Americans signed up for the jobs the Republican myths about moochers would be destroyed for all time. Brooks is correct to call for the use of any private or public sector program that works to increase opportunity and success. If Obama proposes a national jobs guarantee program we will discover whether Brooks’ call for the Republican Party to become “The Party of Work” will either cause them to support the plan or expose the lie in Brooks’ proposed label.

The second major program the administration should fund is revenue sharing. The original stimulus plan had a major revenue sharing component. A coalition of conservative (“blue dog”) Democrats and Republicans killed the revenue sharing component of Obama’s proposed stimulus program. This was a travesty. A national government with a sovereign currency is not like a state or local government. It can and should run a deficit in response to a recession. A state or local government cannot do so. It was certain that state and local governments would suffer severe drops in revenues at the same time that the need for increased state spending to help the unemployed. The inevitable result was that state and local governments would have to fire over one hundred thousand workers and add to unemployment during the Great Recession. The win-win is revenue sharing – a Republican policy initiative. The federal government transfers hundreds of billions of dollars to the state and local governments, which allows them to avoid firing the workers and cutting social services when they are most needed. All of this allows the economy to recover more quickly and eventually reduces the deficit. It also makes America vastly more humane.

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55 comments

  1. craazyman

    I always appreciate Dr. Black and Dr. Hudson’s righteous and insightful commentary — and I always learn something from each post — but dudes, you guys jack the word count so it runs on like rivulets of rain down the side of a glass highrise. It’s amazing at first, but then it just goes and goes and goes, and goes. Sometimes less is more.

    One pancake per post is about right for the morning read. If you’re done with one pancake — say four of five forkfulls plus half a cup of coffee — and the post is still going, it might be too long.

    Just one reader’s opinion. I’m not saying I’m right, or that their even is an objective “rightness” to this, but there is so much to read and so little time. The best writers in the world get in, do their thing, and get out and the reader just says “Wow”.

      1. diptherio

        True and true, but let’s remember that these are both working professors who are, I am sure, busy with lots of other stuff besides trying to educate the masses via blog-posts. I tend to the, “if you think you can do better, then by all means do it,” school of thought on these things. I’m just grateful that we get to see these guys’ brain droppings on a regular basis. I’m old enough to remember a time before the internet, when one could only wonder silently to oneself what Bill Black would say about [insert current insane financial fiasco here], and not be able to go on-line and find out in two shakes. Truly a wonderful time to be alive, even if the analyses are not so polished and slick as we might like.

        I think Crazy points to an urgent need, though: an editor to digest and republish Black, Hudson, et al’s postings for a “Best of UMKC Econ” blog that can be read comfortably whilst consuming no more than one half of an english muffin and a cup of morning coffee.

        1. JTFaraday

          Well, but this goes to a point I was tempted to make (early) this morning and I restrained myself.

          How many renditions of this same lament do we have from Bill Black already? Did we glean one single additional Bill Black brain fart torturing ourselves with any them?

          It seems to me that Black and his would-be “progressive” cohort have two choices at this juncture if they have any interest in being effective,( as opposed to indulging in repetitious windbaggery):

          1). They can edit themselves and seek another public audience. “Great betrayal” is good for that. The public loves a good bumpersticker. Maybe Black should get on Twitter.

          2). They can remember that they are tenured professors with collegial networks and university resources. They can do some real research and develop a real industrial policy for the 21st century that will actually help redevelop the US economy, (instead of consigning everyone to work for Rahm for even less money than Rahm himself would pay them).

          I think those are the clear choices. There may be others.

          Regardless, I’m bored.

          1. Montanamaven

            Yup! Yup! I too agree with JT, Varissa, Chris Rogers , Aquifer, et al . I’m bored with the Ground Hog Day scenario. Using the word “Bored” is not meant to be dismissive or like a character in a Restoration comedy. Bored can really motivate one to seek meaningful action. This is a very good discussion and a welcome relief from all the hopium.

      2. Kurt Sperry

        It would indeed be harder, but Black’s reasoning is so correct that it’s a shame it isn’t available in a less prolix version that will resonate with Joe Sixpack which is who really needs to understand this stuff.

        1. Aquifer

          Yup – how many times does one have to make the point that if a person wants to reach enough folks to make a difference, (s)he has to speak their language ….

    1. Lambert Strether

      Care to attempt a summary?

      * * *

      One problem that heterodox or heretical thinkers have is that the talking points don’t come canned; there ins’t an entire network of Beltway talking shops churning them out, or campaign consultants, actual or wannabe, buffing, polishing, and propagating them.

      The work is original, and produced by a smaller and greatly overworked crew, and Pascal’s remark, “I have made this [letter] longer, because I have not had the time to make it shorter” really does apply.

      I think the MMT crew has come the farthest on this honing and sharpening process, and they’re very, very good, but even they are not as concise or (yet) effective as the neo-liberals. And there is no shortcut; the only way to persuade is to practice persuasion.

      Therefore…. Rather than point to inevitable outcome of structural problems, would it not be better to try one’s hand at shortening the message and making it more useful? The NC commentariat does not lack for fine writers!

      1. Aquifer

        It’s a bit of a Catch 22 – in order to be able to reword it one has to be able to translate it into one’s own language ,,, and that is the problem …

        One suggestion i always proffer is never really considered seriously – As an example I have often said that if someone wants to design a computer program that will sell well because it is REALLY simple to use, they should hire me to kick the tires, because if I can understand and use it, ANYBODY can ….

        The same here – you get a bunch of financial illiterates from various walks of life (shucks i qualify there too) and sit them down and go through various types of explanations until 1) a light comes on AND 2) they can actually ask relevant questions (nodding when asked “do you understand” DOES NOT COUNT) AND 3) correctly express your ideas in their own language. Only when you can achieve all three do you have any idea that folks might actually get it.

        Know i know this may seem like a bald faced advertisement for my services as a bons fide idiot, but hey that doesn’t mean it isn’t a legit suggestion :)

      2. charles sereno

        Bill Black’s Pascal dispensation is preferable to Fermat’s. If it is windbaggery, I’d be happy to test the hypothesis by joining hands with Bill and jumping over the “cliff” (without a parachute).

      3. Carla

        Lambert — Having been as frustrated as many other readers with the length of Prof. Black’s posts, I have taken you up on your challenge and put “Bill Black-Jobs Now” on a diet, cutting the text from 4,126 words to 2,177.

        Where do I send the doc?

    2. PaulArt

      I totally agree. Most of it is preaching to the choir also. Black is good but he should stick to financial regulation and economics and steer away from politics. We are NC readers because we know all this shit about Obama, no point in recounting this for our benefit. Tell us something we don’t know.

    3. LeonovaBalletRusse

      Aw, I’m sorry their dense writing is too taxing for you. Shorter is not always better. You might want to look into some of those “Brain games.”

      Or you can just stay as you are: a wonderfully poetic persona who dislikes a dense, detailed, well-researched argument that distills a mountain of information you might never climb: Exemplary Exposition on a Silver Salver, A Feast of Knowledge you can bank on, even if you can’t digest it.

    4. Susan the other

      I read every word and enjoyed it, but I’m definitely a hack. But I did have this encouraging thought: Professor Black has no intention of just preaching to the choir. He knows that NC attracts a lot of free riders who might otherwise be watching Fox News. And then I had this delightful thought: We should start an email campaign asking Fox News to put Bill Black on. Do a series of interviews with him and all the other UMKCers. It wouldn’t be like the lion’s den because Fox has recently painted itself into a corner and they are out of ideas. They might actually absorb a few good points. Why stop there? Let’s email Rush Boombox and ask him to cover alternative points of view. Ha. Things could get fun all over again.

    1. Chris Rogers

      Obama should be in The Hague charged with war crimes, instead he’s re-elected President – take a gander over at CounterPunch and the heartbreaking story on the continued Drone killing spree Obama sanctions daily with his morning coffer – this is the truth about Obama – how many more children’s blood does he want on his hands – and yet the US electorate voted him in for a second term – hope all who placed a tick by his box get all they deserve and this includes his ‘Great Betrayal’!

      1. LeonovaBalletRusse

        Will my vote for the only Third Party Candidate permitted in Savannah get me on the Kill List? If so, make it quick.

        1. Chris Rogers

          LBR,

          Well, they certainly no doubt have you down as a malcontent in a similar vein to all those who support openly the Occupy Wall Street Movement.

          Anyone who promotes the interests of the majority above the status quo is usually labelled and known about – given such facts, one usually does not bother hiding his own identity, based purely on the fact that they know who I am already.

          Resistance is not futile, even if you are a member of a very small minority – one we trust will grow as Obama and Washington DC embarks on its ‘Great Betrayal’ of the people – regrettably, sanctioned by many of the people themselves on Tuesday.

          Glad you voted Third Party though, one should never give up their vote, unless all do so together – which effectively means a revolution or open revolt against the duopoly and its pay masters.

  2. bluntobj

    If government spending by congress/president were to increase as Black desires, it will not be enough. Two trillion, four trillion, whatever number you might choose, there will be no “recovery,” nor any return to previous bubble positions.

    That’s the goal, right? To return to the levels of economic activity characterized by an stock bubble that developed from a completely new form of communication, or a property bubble filled with debt without a care for its repayment?

    I’m curious, really, because if the point is not to return economic activity back to bubble levels, then what is the point?

    I’m sure I could point out Japan has had this same issue over the last 20 years. I’m sure that Bill can trot out his standard defenses to those criticisms. Just like Krguman, I’m sure that it would be along the lines of “they should have done more!” So, lets pose an academic question:

    If Japan were to immediately issue a quadrillion yen worth of bonds, would that spark their economy out of deflation and into new productive heights?

    1. diptherio

      If the newly created currency is placed in the hands of citizens, rather than into banks’ reserve accounts, then yes, there will be an increase in economic activity and productivity. We don’t need to return to bubble-levels, obviously, but 8% unemployment (14% U-6, I believe) is unacceptable and ensures the slow death of our economy (and plenty of us along with it).

      A Job Guarantee program would probably be the most effective (and ethical) way to inject new funds at the BOTTOM, where they will be put into circulation immediately. Overall, what needs to happen, in my view, is to start a process of wealth redistribution from the top down, with a goal of reaching some Gini coefficient or another. Increase tax rates on the top tier to Nixon levels and make sure all QE is being injected at the bottom.

      (Check out this amazing chart that shows how all the QE is just sitting in reserve accounts at the Fed. It’s at about 1:00 in: http://www.youtube.com/watch?v=egiT_g06L4Q)

      Additionally, we need to ban most all advertising, outlaw excessive packaging, and start trying to un-brainwash ourselves from the consumerist/conspicuous-consumption mentality that is literally destroying our planet.

    2. LeonovaBalletRusse

      They are ADDICTED to Hot Money *Profits* derived from Bubbles. This is in addition to their being addicted to cocaine, primo tail, self-worship, lies, etc.

  3. TK21

    “The attraction of the Grand Bargain to Obama is fame, as even the Washington Post (which views the Grand Bargain as divine) repeatedly emphasized.”

    That’s very interesting. I thought that Obama’s desire for this deal was a policy preference, but apparently it’s personal. That could affect how we try to persuade politicians not to do it.

    1. LeonovaBalletRusse

      Clearly, he wants to *make history* as the Divine Mediator, the Divine Judge, no doubt King Solomon is the face in his mirror.

  4. Kurt Sperry

    The real problems in America are obviously less to do with total economic activity or incomes or wealth than distributional. With more equitable distributions, even permanent “recession” would be a perfectly tolerable state of affairs. The pie is big enough as it is, it’s just being sliced increasingly badly.

  5. JEHR

    I do not want to discourage any of Mr. Black’s works as they provide an important account of politics and politicians. (I may just have to read half now and half later!)

  6. Aquifer

    What strikes me as interesting is that we are continuing the conversation – going back to exactly where we left off before the election blip – the one where we talk all about the problems and faults of the admin and what to do – completely ignoring the opportunity, the “one brief shining moment” we had last week to actually take all these great ideas to the polls. By now i should stop being so amazed that Profs like Black perpetually fail to champion the challengers to the duopoly, the ones that would actually put into practice the policies they advocate, and instead stay in the fold, albeit “under protest”, of the very pols who do what they criticize and bemoan.

    We, they, had a great opportunity to get our message across in the only way that makes ANY impression on these goons in DC, and we, they, blew it, once again – will Ground hog Day never come to an end …

    So i have watched this play before – and know the dialogue – we will have endless columns analyzing what is wrong, and the perfidy of the pols who facilitate the crooks – the same thing that has been wrong for ages, followed by prescriptions of how to fix it, the same prescriptions we have heard for ages, followed by urges to “pressure” the DC goons to adopt those fixes, followed by lamentations when they don’t and mumbles about the need for a 3rd party, followed by instructions to ignore that 3rd party at the polls and return the goons to office because, oh take your pick, TINA, 3rd party “can”‘t win” so we need LOTE, whatever …

    I started watching this play in earnest after the ’00 elections, trying to understand why “prog” gurus would do the LOTE thing – so i subscribed to several “prog” pubs and read them through ’04 – caught the scenario. Then watched as the scenario regurgitated, and cancelled the pubs – who needed them, i knew where they were going …. Went to some on line prog blogs – saw same scenario pretty much through ’08 and now ’12. Variations on a theme – some of the writing good enough to read for it’s literary/poetic value, if not for its content or line of “reasoning” because i had pretty much heard that already ….

    So now, here we are, where we were, and, hang me for a fool, but i don’t see any sign that we are changing direction, or even rhetoric, for that matter … And although the “familiar” can be comforting for all that, am sort of at the point where i want to say to them “come back when you decide you want to walk your talk and i will happily join you …. As i joined Stein when she did …

    1. citalopram

      The left is disenfranchised and dead, politically speaking. Frankly I don’t know what it’s going to take to wake people up other than hurrying the austerity along so we can relive the 19th and early 20th century all over again.

      Your less than 2 percent of the vote doesn’t matter.

      We need people to waken up and obtain class consciousness.

      We need them to be aware of what’s going on.

      We need them to act and resurrect massive civil disobedience on a large scale.

      1. Aquifer

        You’re right – as long as it IS less than 2%, it doesn’t matter. That is why that is precisely where TPTB want to keep it – and to the extent that blogs and progs and profs and sophs reinforce and facilitate that result, they are, albeit “unintentionally”, preserving the status quo, until, mayhap, we get to the point where your prescription, much like the wicked chemotherapy used for advanced CA, with all its nasty side effects, may be all that’s “left” ….

    2. tiebie66

      I feel much the same way. Hence I see a benefit to austerity as it will starve the beast and force a change of course. Why on earth would we want to engage in deficit spending and restore the status quo ante? I certainly do not think the economy was healthy in 2006 and I do not think we should go back there. What prevents deficit spending from simply further benefiting the rich, either directly or indirectly? I also wonder about the jobs guarantee thing, did not that fail in the soviet states?

      Depressing, really: the situation is untenable and the prescriptions unconvincing. Wish I had an answer.

    3. LeonovaBalletRusse

      Aquifer, the *Left* is following HALF of the advice of Roberto Unger, who may have spoken for himself, or who may have been “just taking orders”

      This *Progressive* (some say *Radical Left*) Sage of Harvard Law School, of deep experience and of the “Elite” Blood and Soil of South America, announced months ago that the only way the *Left* would ever live again would be if the Republican Candidate [half of the Duopoly] were elected President in 2012, leading to a collapse of Economics+Politics on the Republican watch, during which collapse the Left would be re-grouping radically with demands certain in C.21.

      The Party Line “Left” who voted for Obama either did not believe Unger, or they didn’t have the courage of his convictions, or they are corrupt, or they are *useful idiots.” So now it’s “four more years of the same.”

  7. Elliot

    I agree that this article could and should be shorter. Not that it’s hard to understand; it’s not. But too much of the work that would be very useful to hand off to friends and acquaintances, to illumine what I find so wrong with how our country’s economics are being handled, is of the ‘tl;dr’ variety. A visit with Strunk and White could really help; the Elements of Style is available online.

    One point on the ‘incoherence’ angle; they are not in fact incoherent (with stupid/ineffectual/dangerous policies). They simply want different things from the economy than most of us do, and use the brief talking points their target audience believes or agree with. Once you look at what they are really after (the end results of their proposals) and ignore what they say about those proposals, it’s quite clear.

  8. Tom

    Let us get down to the obvious instead of throwing fancy labels and petty fighting words around.
    Most people can’t make enough money to support buying things that are needed in their lives beyond survival. Nothing is wrong with creating art to earn money to buy food or artisan bread and nick-nacks that are nice to have. The only thing wrong with wealth creation is when, by so doing it treads on the inalienable rights of someone else.

    I will simplify: The economic structure is bad for most people.

    Some basic natural laws are being broken – if you don’t believe me, ask nature and listen to what she is saying – in her voice. Really, if you can’t believe that nature is outside her bounds of balance…outside the bounds of her natural flux then you, yourself, can’t imagine yourself as part of nature.
    What drives our interaction with the natural world, our resource allocations etc. – it is our translative economic, legal and governmental structures, ie: it is how we put-up with, or, put-down each others bullshit. Last I heard, we have not found another planet to live on and, this planet is yelling at us (increased cancer, disease, starvation, reduced biodiversity, war, unnecessary famine, survival instinct kicking in at massive scales etc.), ie: we have not advanced enough to deal with each others shit.
    I do not, for a second, believe that we are running out of the basics to sustain us – the elements of wealth creation (capital, labor and a place to live shit and breath) like, for instance, the fucking planet.
    Lets face it, without this planet – we would not be here – lol.
    Appears that we stupid humans, in our self concept, have forgotten one simple fact – it is not a good idea to alienate fellow humans from this planet – not many places to send the alienated…might cause some problems…just saying.
    How bout a mental game: Mass die off of the human species or, if you will, mass deflation — in economics that would be a bad thing — in nature; nature takes more interest in a rat’s ass than it does about economics. All forms of wealth creation can be done without harming the very planet we live on – we just have not got there yet. Nature is easily capable of restoring her natural balance without concern for any particular species of flora and fauna.
    Hey, if humans want to collectively live in the bottom of a toilet bowl- nature will be happy to take the first crap.

    To simplify: We humans are breaking nature’s law through our human constructs – law, politics, economics.

    Resource allocation – never a good idea to give a small group of people the power to decide who lives and dies – they generally pick everybody else instead of choosing among themselves. Obviously, when you have a ton of people homeless and a ton of empty homes – something is wrong. When you have a ton of people out of work and a ton of work to be done – something is wrong.

    Maybe we can’t look at the bad side of human nature as a given – we hate too look at ourselves as a tribe of monkeys with all the base functioning that goes on there – not us – no no no not us – we were taught different and besides, we have religion – not us — LOL. – homicide, patricide, genocide, guilt, shame, ego, power, domination, survival instinct, jealousy, shameless self interest, fraud, deception, war, famine, rationalization, hostility etc. etc….
    Generally it is acceptable human practice to create forms of government, laws, economic structures that promote the general welfare… that advance the human spirit and heart, that allow peoples freedoms and privacy, that prevent others from denying our human dignity and love, that put people above just survival so that our higher functioning brains can be unleashed to advancing a more perfect union.
    Generally, laws, economics, governments are put together to discourage known human traits that have been shown to be destructive to other humans going back to before human history – these laws, economics, governments have been known to fail when they forget about why we put these structures together in the first place. – I would guess we failed every time.

    So, if we forget why the hell we humans try to create civilizations and revert to stupidity – then what the hell good are we doing living on this planet.

    “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” – Abraham Lincoln

    However, the evolutionary process by which monkeys made men of themselves was considerably slower than the reverse process.

    I apologize again for my babble and venting.
    Thanks Bill Black for your reporting on the obvious lawlessness that certain factions of this civilization continue to try to obfuscate in their attempts to avoid the contempt they deserve.

    1. Tom

      Just a note from my experience down at Hurricane Katrina.
      The maggots generally try to come out of the refrigerator after an extended power outage.
      Our planet does not have door.

  9. kevinearick

    Ohio & Germany

    SO, my stupid, lazy, conniving, a-hole family in Ohio and Germany f-ed everyone again. Surprise, surprise.

    If you don’t want to listen, at least don’t argue.

    If you want to listen, you will learn to employ the empire’s weight against itself, as an individual. You cannot escape its gravity as a group. You employ explicit democracy implicitly. D & R is a tag team, with all the rules made in its favor. As a couple, you take turns being the focus of its crucifiction.

    I don’t have to know who or where you are to crush you, if you belong to any type of group.

    Get the Friday addition of the WSJ. Underline the relavant passages for the next 6 months. 6 months from now, go back and see how you did. If you want stupid, reach out for a journalist.

    I’ll start you out: “There are probably 18 to 20 people in the [US] who have the fundamemal skills…” ” The devices targetted by Stuxnet, called programmable logic controllers…”

  10. financial matters

    I am wading through ‘Trade, Development and Foreign Debt’ by Michael Hudson. 1992, updated 2009. Probably the most difficult task I have undertaken ;) But the depth and insightfulness of his extensive research is captivating.

    I also learned much from his book ‘Super Imperialsim’ 1972, updated 2003.

    I have purchased his ‘The Bubble and Beyond’ 2012 and am looking forward to that as my next project.

    I love the way he meticulously digs into his subject and then tears it apart like a mad dog. ;)

    His measured and on target ferocity is similar to that of Naomi Klein. Martial artists who land the 3 step jump/spinning side kick with precision.

  11. athena1

    I wonder how many LOTE advocates have read Griftopia?

    When trying to help the less educated evolve, I usually point to Hudson’s 2006 New Road to Serfdom as evidence that he really does know what’s going on. I tell them to then read Griftopia (too bad it’s not free online…the chapter on Greenspan is essential). I then point them to Dean Baker and this here NC crew as a good source of info.

    The unfortunate truth is that this stuff can’t usually be bullet-point-ized. The CEPR blog does it ok. Baker’s pretty good at writing a paragraph that says what it would take me a novel to write.

    1. Lambert Strether

      I think everything can be bulletized, given a level of effort. (You could think of the Sermon on the Mount, for example, as being bulletized — and if that doesn’t bring F Beard back, nothing willl…)

      However, it is extremely difficult work, and can only be performed in the public eye.

      If anyone wants to watch a master of pithy meme generation in action, follow Eschaton.

      1. athena1

        You might be right.
        Corrent’s platform is a good example of excellent bullet points:

        1. Medicare for All

        2. End the Wars

        3. Tax the Rich

        4. A Jobs Guarantee

        If a low info Dem asks “why” to #1 I could point out that, like Baker says, “We’d have a huge budget surplus if our medical costs were in line with the other first world countries.” No idea how to bullet point how Obamacare is not like the French model, though. I *know* why, but it would take a novel for me to explain it, tho.

        #2 and 3 are basic morality issues more than macro economics, I think. I mean, they’re economic issues, too, but the morality is easier to communicate.

        With #4, maybe the TINA meme can help communicate that if someone argues “it’s just not possible.” Also, it could be paired with the serious need for a New Green Deal?
        BUT, IME, part of the problem with the LOTE crowd is that they have no idea what the New Deal even WAS. Sooo…

        Just thinking out loud here…

  12. Dan Kervick

    The Democratic Party’s rank and file pundits are really lost in the fog of their unresolved double-think and dual intellectual loyalties. The older Keynesian and Rooseveltian heritage sits side by side in mainstream Democratic thinking with the newer neoliberal, DLC-style Clintonian heritage. These two approaches to economic policy are not compatible.

    1. Joe Firestone (LetsGetitDone)

      Right. The DLC Governors are neoliberals. Clinton was a southern Governor himself. Steeped in balanced budget BS. Obama must have gotten there by way of Grandmother, a Bank VP in Hawaii. Their notion of fiscal responsibility is all about watching those profits.

  13. Howard Beale IV

    And as this last election has shown, we get the government we deserve. The fact that at the end of this cycle, you have essentially the same set of characters in their positions means nothing is going to change. I full expect that Spain and Greece will visit the US in the next 10 years. It just wasn’t a few days that it was announced that Chevron got whacked by Stuxnet. Now think how many attacks are currently happening that aren’t getting reported. And that’s just one front.

  14. Benedict@Large

    I hate to get picky (not really) because this is mostly good stuff, but I’m convinced a lot of the problems MMT has with communicating its ideas lies with not being careful about its wording. Consider about a third of the way down:

    “Tax fairness is not irrelevant, …”

    Well, it is in this case; which is, how to get the economy back on its feet, and how not to. The fact is that the economy can be returned to a far more “normal” state without ever addressing the tax question (i.e., leaving the status quo intact), because we are essentially talking about federal spending, and federal spending is not linked to taxes, at least not in any short- to medium-term modeling.

    [In fact, we could go further and declare that "fairness" itself was not a concept applicable to tax policy. What after all do taxes do in an MMT economy? Simply, they make certain behaviours (those which are taxed) more expensive. (Within this, they set the value of money by regulating demand, steering demand away from consumption which would produce inflation. Inflation-producing behavior is thus more expensive.) Where exactly does this involve fairness? Inflation is where it is, and if we don't like smoking, why is it unfair to tax it?]

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