Bill Black: Hillary’s Threat to Wage Continuous War on the Working Class via Austerity Proved Fatal

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. Jointly published at New Economic Perspectives

I’ve come back recently from Kilkenny, Ireland where I participated in the seventh annual Kilkenomics – a festival of economics and comedy. The festival is noted for people from a broad range of economic perspectives presenting their economic views in plain, blunt English. Kilkenomics VII began two days after the U.S. election, so we added some sessions on President-elect Trump’s fiscal policy views. Trump had no obvious supporters among this diverse group of economists, so the audience was surprised to hear many economists from multiple nations take the view that his stated fiscal policies could be desirable for the U.S. – and the global economy, particularly the EU. We all expressed the caution that no one could know whether Trump would seek to implement the fiscal policies on which he campaigned. Most of us, however, said that if he wished to implement those policies House Speaker Paul Ryan would not be able to block him. I opined that congressional Republicans would rediscover their love of pork and logrolling if Trump implemented his promised fiscal policies.

The audience was also surprised to hear two groups of economists explain that Hillary Clinton’s fiscal policies remained pure New Democrat (austerity forever) even as the economic illiteracy of those policies became even clearer – and even as the political idiocy of her fiscal policies became glaringly obvious. Austerity is one of the fundamental ways in which the system is rigged against the working class. Austerity was the weapon of mass destruction unleashed in the New Democrats’ and Republicans’ long war on the working class. The fact that she intensified and highlighted her intent to inflict continuous austerity on the working class as the election neared represented an unforced error of major proportions. As the polling data showed her losing the white working class by staggering amounts, in the last month of the election, the big new idea that Hillary pushed repeatedly was a promise that if she were elected she would inflict continuous austerity on the economy. “I am not going to add a penny to the national debt.”

The biggest losers of such continued austerity would as ever be the working class. She also famously insulted the working class as “deplorables.” It was a bizarre approach by a politician to the plight of tens of millions of Americans who were victims of the New Democrats’ and the Republicans’ trade and austerity policies. As we presented these facts to a European audience we realized that in attempting to answer the question of what Trump’s promised fiscal policies would mean if implemented we were also explaining one of the most important reasons that Hillary Clinton lost the white working class by such an enormous margin.

Readers of New Economic Perspectives understand why UMKC academics and non-academic supporters have long shown that austerity is typically a self-destructive policy brought on by a failure to understand how money works, particularly in a nation like the U.S. with a sovereign currency. We have long argued that the working class is the primary victim of austerity and that austerity is a leading cause of catastrophic levels of inequality. Understanding sovereign money is critical also to understanding why the federal government can and should serve as a job guarantor of last resort. People, particularly working class men, need jobs, not simply incomes to feel like successful adults. The federal jobs guarantee program is not simply economically brilliant it is politically brilliant, it would produce enormous political support from the working class for whatever political party implemented it.

At Kilkenomics we also used Hillary’s devotion to inflicting continuous austerity on the working class to explain to a European audience how dysfunctional her enablers in the media and her campaign became. The fact that Paul Krugman was so deeply in her pocket by the time she tripled down on austerity that he did not call her out on why austerity was terrible economics and terrible policy shows us the high cost of ceasing to speak truth to power. The fact that no Clinton economic adviser had the clout and courage to take her aside and get her to abandon her threat to inflict further austerity on the working class tells us how dysfunctional her campaign team became. I stress again that Tom Frank has been warning the Democratic Party for over a decade that the policies and the anti-union and anti-working class attitudes of the New Democrats were causing enormous harm to the working class and enraging it. But anyone who listened to Tom Frank’s warnings was persona non grata in Hillary’s campaign. In my second column in this series I explain that Krugman gave up trying to wean Hillary Clinton from her embrace of austerity’s war on the working class and show that he remains infected by a failure to understand the nature of sovereign currencies.

What the economists were saying about Trump at Kilkenomics was that there were very few reliable engines of global growth. China’s statistics are a mess and its governing party’s real views of the state of the economy are opaque. Japan just had a good growth uptick, but it has been unable to sustain strong growth for over two decades. Germany refuses, despite the obvious “win-win” option of spending heavily on its infrastructure needs to do so. Instead, it persists in running trade and budget surpluses that beggar its neighbors. England is too small and only Corbyn’s branch of Labour and the SNP oppose austerity. “New Labour” supporters, most of the leadership of the Labour party, like the U.S. “New Democrats” that served as their ideological model, remain fierce austerity hawks.

That brings us to what would have happened if America’s first family of “New Democrats” – the Clintons – had won the election. The extent to which the New Democrats embraced the Republican doctrine of austerity became painfully obvious under President Obama. Robert Rubin dominated economic policy under President Clinton. The Clinton/Gore administration was absolutely dedicated toward austerity. The administration was the lucky beneficiary of the two massive modern U.S. bubbles – tech stocks and housing – that eventually produced high employment. Indeed, when the tech bubble popped the economy was saved by the hyper-inflation of the housing bubble. The housing bubble collapsed on the next administration’s watch, allowing the Clintons and Rubinites to spread the false narrative that their policies produced superb economic results.

When we think of the start of the Obama administration, we think of the stimulus package. In one sense this is obvious. The only economically literate response to a Great Recession is massive fiscal stimulus. When Republicans control the government and confront a recession they always respond with fiscal stimulus in the modern era. Obama’s stimulus plan was not massive, but it sounded like a large number to the public. Two questions arise about the stimulus plan. Why was Obama willing to implement it given his and Rubin’s hostility to stimulus? Conversely, why, given the great success of the stimulus plan, did Obama abandon stimulus within months?

Rubin and his protégés had a near monopoly on filling the role of President Obama’s key economic advisors. Larry Summers is a Rubinite, but he is infamous for his ego and he is a real economist from an extended family of economists. Summers was certain in his (self-described) role as the President’s principal economic adviser to support a vigorous program of fiscal stimulus because the Obama administration had inherited the Great Recession. Summers knew that any other policy constituted economics malpractice. Christina Romer, as Chair of the President’s Council of Economic Advisers and Jared Bernstein, Vice President Biden’s chief economist, were both real economists who strongly supported the need for a powerful program of fiscal stimulus. Each of these economists warned President Obama that his stimulus package was far too small relative to the massive depths of the Great Recession.

Rubin’s training was as a lawyer, not as an economist, so Summers was not about to look to Rubin for economic advice. In fairness to Rubin, he was rarely so stupid as to reject stimulus as the appropriate initial response to a recession. He supported President Bush’s 2001 stimulus package in response to a far milder recession and President Obama’s 2009 stimulus package. Rubin does not deserve much fairness. By early 2010, while Rubin admitted that stimulus is typically the proper response to a recession and that the 2009 stimulus package was successful, he opposed adding to the stimulus package in 2010 even though he knew that Obama’s 2009 stimulus package was, for political reasons, far smaller than the administration’s economists knew was needed.

Here’s ex-Treasury Secretary Robert Rubin–one of the chief architects of the global financial crisis–articulating the position of his proteges at 1600 Pennsylvania Ave.

Robert Rubin: “Putting another major stimulus on top of already huge deficits and rising debt-to-GDP ratios would have risks. And further expansion of the Federal Reserve Board’s balance sheet could create significant problems…. Today’s economic conditions would ordinarily be met with expansionary policy, but our fiscal and monetary conditions are a serious constraint, and waiting too long to address them could cause a new crisis….

In the spirit of Kilkenomics, we were blunt about the austerity assault that Rubin successfully argued Obama should resume against America’s working class beginning in early 2010. It was inevitable that it would weaken and delay the recovery. Tens of millions of Americans would leave the labor force or remain underemployed and even underemployed for a decade. The working class would bear the great brunt of this loss. In modern America this kind of loss of working class jobs is associated with mental depression, silent rage, meth, heroin, and the inability of working class males and females to find a marriage partner, and marital problems. It is a prescription for inflicting agony – and it is a toxic act of politics.

Prior to becoming a de facto surrogate for Hillary and ceasing to speak truth to her and to America, Paul Krugman captured the gap between the Obama administration’s perspective and that of most of the public.

According to the independent committee that officially determines such things, the so-called Great Recession ended in June 2009, around the same time that the acute phase of the financial crisis ended. Most Americans, however, disagree. In a March 2014 poll, for example, 57 percent of respondents declared that the nation was still in recession.

The type of elite Democrats that the New Democrats idealized – the officers from big finance, Hollywood, and high tech – recovered first and their recovery was a roaring success. Obama, and eventually Hillary, adopted the mantra that America was already great. Our unemployment rates, relative to the EU nations forced to inflict austerity on their economies, is much lower. But the Obama/Hillary mantra was a lie for scores of millions of American workers, including virtually all of the working class and much of the middle class. As Hillary repeated the mantra they concluded that she was clueless about and indifferent to their suffering. As we emphasized in Kilkenny, Obama and Hillary were not simply talking economic nonsense, they were committing political self-mutilation.

Krugman used to make this point forcefully.

[T]he American Recovery and Reinvestment Act, aka the Obama stimulus … surely helped end the economy’s free fall. But the stimulus was too small and too short-lived given the depth of the slump: stimulus spending peaked at 1.6 percent of GDP in early 2010 and dropped rapidly thereafter, giving way to a regime of destructive fiscal austerity. And the administration’s efforts to help homeowners were so ineffectual as to be risible.

Timothy Geithner, a proponent of austerity, is famous for remarking that he only took only one economics class – and did not understand it. In the same review of Geithner’s book by Krugman that I have been quoting, Krugman gives a concise summary of Geithner’s repeated lies about his supposed support for a larger stimulus. Jacob Lew, the Rubinite who Obama chose as Geithner’s successor as Treasury Secretary, was also trained as a lawyer and is equally fanatic in favoring austerity. In 2009, no one with any credibility in economics within the Obama administration could serve as an effective spokesperson for austerity as the ideal response to the Great Recession.

But Romer, Summers, and Bernstein experienced the same frustration as 2009 proceeded. The problem was not simply the Rubinites’ fervor for the self-inflicted wound of austerity – the fundamental problem was President Obama. Obama’s administration was littered with Rubinites because Obama was a New Democrat who believed that Rubin’s love of austerity and trade deals was an excellent policy. Of course, he had campaigned on the opposite policy positions, but that was simply political and Obama promptly abandoned those campaign promises. Fiscal stimulus ceased to be an administration priority as soon as the stimulus bill was enacted. Romer and Summers recognized the obvious and soon made clear that they were leaving. Bernstein retained Biden’s support, but he was frozen out of influence on administration fiscal policies by the Rubinites.

By 2010, the fiscal stimulus package had begun to accelerate the U.S. recovery. Romer left the administration in late summer 2010. Summers left at the end of 2010. Bill Daley (also trained as a lawyer) became Obama’s chief of staff in early 2011. Timothy Geithner, and finally Jacob Lew dominated Obama administration fiscal policy from late 2010 to the end of the administration in alliance with Daley and other Rubinite economists. It may be important to point out the obvious – Obama chose to make each of these appointments and there is every reason to believe that he appointed them because he generally shared their views on austerity. In the first 60 days of his presidency he went before a Congressional group of New Democrats and told them “I am a New Democrat.”

Obama began pushing for the fiscal “grand bargain” in 2010. The “grand bargain” would have pushed towards austerity and begun unraveling the safety net. As such, it was actually the grand betrayal. Obama’s administration began telling the press that Obama viewed achieving such a deal with the Republicans critical to his “legacy.” There were two major ironies involving the grand bargain. Had it been adopted it would have thrown the U.S. back into recession, made Obama a one-term president, and led to even more severe losses for the Democratic Party in Congress and at the state level. The other irony was that it was the Tea Party that saved Obama from Obama’s grand betrayal by continually demanding that Obama agree to inflict more severe assaults on the safety net.

Obama adopted Lew’s famous, economically illiterate line and featured it is in his State of the Union Address as early as January 2010. What follows is a lengthy quotation from that address. I have put my critiques in italics after several paragraphs. Obama’s switch from stimulus to austerity was Obama’s most important policy initiative in his January 2010 State of the Union Address.

The White House

Office of the Press Secretary

For Immediate Release

January 27, 2010

Remarks by the President in State of the Union Address

Now — just stating the facts.  Now, if we had taken office in ordinary times, I would have liked nothing more than to start bringing down the deficit.  But we took office amid a crisis.  And our efforts to prevent a second depression have added another $1 trillion to our national debt.  That, too, is a fact.

Why would Obama normally have been thrilled to “start bringing down the deficit?” A budget deficit by a nation with a sovereign currency such as the U.S. is normal statistically and typically desirable when we have a negative balance of trade. No, it is not a “fact” that stimulus “added another $1 trillion to our national debt.” Had we not adopted a stimulus program the debt would have grown even larger as our economy fell even more deeply into the Great Recession.

I’m absolutely convinced that was the right thing to do.  But families across the country are tightening their belts and making tough decisions.  The federal government should do the same.  (Applause.)  So tonight, I’m proposing specific steps to pay for the trillion dollars that it took to rescue the economy last year.

Obama admits that stimulus was desirable. He knows that his economists believed that if the stimulus had been larger and lasted longer it would have substantially speeded the recovery. One of the most important reasons why dramatically increased government fiscal spending (stimulus) is essential in response to a Great Recession for a depression is that the logical and typical consumer response to such a downturn is for “families across the country” to “tighten their belts” by reducing spending. That reduces already inadequate demand, which leads to prolonged downturns. Economists have long recognized that it is essential for the government to do the opposite when consumers “tighten their belts” by greatly increasing spending. To claim that it is “common sense” to “do the same” – exacerbate the inadequate demand – because it is a “tough decision” makes a mockery of logic and economics. It is a statement of economic illiteracy leading to a set of policy decisions sure to harm the economy and the Democratic Party. In particular, it guaranteed a nightmare for the working class.

No, no, no. I can feel the pain of my colleagues that are scholars in modern monetary theory (MMT). The U.S. has a sovereign currency. We can “pay” a trillion dollar debt by issuing a trillion dollars via keystrokes by the Fed. What Obama meant was that he would propose (over time) to increase taxes and reduce federal spending by one trillion dollars. Such an austerity plan would harm the recovery and reduce important government services. Again, the working class were sure to be the primary victims of Obama’s self-inflicted austerity.

Starting in 2011, we are prepared to freeze government spending for three years.  (Applause.)  Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected.  But all other discretionary government programs will.  Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t.  And if I have to enforce this discipline by veto, I will.  (Applause.)

First, the metaphor is economically illiterate and harmful. A government with a sovereign currency is not a “cash-strapped family.” It is not, in any meaningful way, “like” a “cash-strapped family.” Indeed, the metaphor logically implies the opposite – that it is essential that because the government is not like a “cash-strapped family” only it can spend in a counter-cyclical fashion (stimulus) to counter the perverse effect of “cash-strapped famil[ies]” cutting back their spending due to the Great Recession.

Let’s take this slow. In a recession, consumer demand is grossly inadequate so firms fire workers and unemployment increases. We need to increase effective demand. As a recession hits and workers see their friends fired or reduced to part-time work, a common reaction is for workers to reduce their debts, which requires them to reduce consumption. Consumer consumption is the most important factor driving demand, so this effect, which economists call the paradox of thrift, can deepen the recession. Workers are indeed cash-strapped. Governments with sovereign currencies are, by definition, not cash-strapped. They can and should engage in extremely large stimulus in order to raise effective demand and prevent the recession from deepening. Workers will tend to reduce their spending in a pro-cyclical fashion that makes the recession more severe. Only the government can spend in a counter-cyclical fashion that will make the recession less severe and lengthy.

We will continue to go through the budget, line by line, page by page, to eliminate programs that we can’t afford and don’t work.  We’ve already identified $20 billion in savings for next year.  To help working families, we’ll extend our middle-class tax cuts.  But at a time of record deficits, we will not continue tax cuts for oil companies, for investment fund managers, and for those making over $250,000 a year.  We just can’t afford it.  (Applause.)

Now, even after paying for what we spent on my watch, we’ll still face the massive deficit we had when I took office.  More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket.  That’s why I’ve called for a bipartisan fiscal commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad.  (Applause.)  This can’t be one of those Washington gimmicks that lets us pretend we solved a problem.  The commission will have to provide a specific set of solutions by a certain deadline.

The Democrats have to stop attacking Republicans for running federal budget deficits. I know it’s political fun and that the Republicans are hypocritical about budget deficits. Deficits are going to be “massive” when an economy the size of the U.S. suffers a Great Recession. We have had plenty of “massive” deficits during our history under multiple political parties. None of this has ever led to a U.S. crisis. We have had some of our strongest growth while running “massive” deficits. Conversely, whenever we have adopted server austerity we have soon suffered a recession. In 1937, when FDR listened to his inept economists and inflicted austerity, the strong recovery from the Great Depression was destroyed and the economy was thrust back into an intense Great Depression.

As to the debt “commission” to solve our “debt crisis,” it was inevitable that such a commission would be dominated by Pete Peterson protégés and that they would demand austerity and an assault on the federal safety net. That would be a terrible response to the Great Recession and the primary victims of the commission’s policies would be the working class.

Now, yesterday, the Senate blocked a bill that would have created this commission.  So I’ll issue an executive order that will allow us to go forward, because I refuse to pass this problem on to another generation of Americans.  (Applause.)  And when the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason for why we had record surpluses in the 1990s.  (Applause.)

For a nation with a sovereign currency, there is nothing good about the “record surpluses in the 1990s.” Such substantial surpluses have occurred roughly nine times in U.S. history and each has been followed shortly by a depression or the Great Recession. This does not prove causality, but it certainly recommends caution. Similarly, “pay-as-you-go” has been the bane of Democratic Party efforts to help the American people. Only a New Democrat like Obama would call for the return of the anti-working class “pay-as-you-go” rules.

Now, I know that some in my own party will argue that we can’t address the deficit or freeze government spending when so many are still hurting.  And I agree — which is why this freeze won’t take effect until next year — (laughter) — when the economy is stronger.  That’s how budgeting works.  (Laughter and applause.)  But understand –- understand if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery -– all of which would have an even worse effect on our job growth and family incomes.

No. It wouldn’t have damaged our markets, increased interest rates or jeopardized our recovery. We had just run an empirical experiment in contrast to the Eurozone. Stimulus greatly enhanced our recovery, while interest rates were at historical lows, and led to surging financial markets. Austerity had done the opposite in the eurozone.

From some on the right, I expect we’ll hear a different argument -– that if we just make fewer investments in our people, extend tax cuts including those for the wealthier Americans, eliminate more regulations, maintain the status quo on health care, our deficits will go away.  The problem is that’s what we did for eight years.  (Applause.)  That’s what helped us into this crisis.  It’s what helped lead to these deficits.  We can’t do it again.

Rather than fight the same tired battles that have dominated Washington for decades, it’s time to try something new.  Let’s invest in our people without leaving them a mountain of debt.  Let’s meet our responsibility to the citizens who sent us here.  Let’s try common sense.  (Laughter.)  A novel concept.

Let’s try actual common sense instead of metaphors that are economically illiterate. Let’s try real economics. Let’s stop talking about “mountains of debt” as if they represented a crisis for the U.S. and stop ignoring the tens of millions of working class Americans and Europeans whose lives and families were treated as austerity’s collateral damage and were not even worth discussing in Obama’s ode to the economic malpractice of austerity. Austerity is the old tired battle that we repeat endlessly to the recurrent cost of the working class.

Trump is Not Locked into Austerity

I note the same caution we gave in Ireland – we don’t know whether President Trump will seek to implement his economic proposals. Trump has proposed trillions of dollars in increased spending on infrastructure and defense and large cuts in corporate taxation. In combination, this would produce considerable fiscal stimulus for several years. The point we made in Ireland is that if he seeks to implement his proposals (a) we believe he would succeed politically in enacting them and (b) they would produce stimulus that would have a positive effect on the near and mid-term economy of the U.S. Further, because the eurozone is locked into a political trap in which there seems no realistic path to abandoning the self-inflicted wound of continuous austerity, Trump represents the eurozone’s most realistic hope for stimulus.

Final Cautions

Each of the economists speaking on these subjects in Kilkenny opposed Trumps election and believe it will harm the public. Fiscal stimulus is critical, but it is only one element of macroeconomics and no one was comfortable with Trump’s long-term control of the economy. I opined, for example, that Trump will create an exceptionally criminogenic environment that will produce epidemics of control fraud. The challenge for progressive Democrats and independents is to break with the New Democrats’ dogmas. Neither America nor the Democratic Party can continue to bear the terrible cost of this unforced error of economics, politics, and basic humanity. I fear that the professional Democrats assigned the task of re-winning the support of the white working class do not even have ending the New Democrats’ addiction to austerity on their radar. They are probably still forbidden to read Tom Frank.


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  1. Steve H.

    : a real economist from an extended family of economists.

    This statement is disturbing in several ways. A distraction from a fine article.

    1. Oregoncharles

      He means an economist he agrees with. Given some of Summers’ other qualities, which Black notes, that is indeed an unfortunate way to put it.

      Evidently economics is a deeply divided field – IMHO, because it’s really political ideology. I happen to agree with Black’s version; it seems pretty obvious to me. But that’s because it’s ideology. Dismissing those who disagree as “not real,” when they have essentially the same credentials, is unfair enough to undercut his message.

      Personally, I think the whole field should be abolished and started over from scratch; I’d favor saving Black as a re-founder. But I’m not an economist.

      *: IIRC, Black is both a lawyer and an economist. His implied thoughts on their relative roles are revealing.

      1. Russell

        No, in this and the other Black used the word “Pragmatic”.
        Modern Monetary Theory is Pragmatism at its finest, from my point of view.
        It also stands up to Classical Economic Actions of the Ancients, who canceled debts to themselves when the people were without means.
        What a stupid sounding word, but that is in line with Hudson’s repeated demands for realistic write downs of debts.
        Trump is scary for his adherence to Mobster Financial Engineering techniques.

    2. ChrisAtRU

      If I read Bill correctly here, the term is being used (somewhat) sarcastically. He leads with Rubin, who favored austerity and posits Summers as a Rubinite. Despite being the acolyte of an austerian, Summers comes to recognize that stimulus was indeed necessary. IMO, the reader is invited to assess what should suffice as real economics, and Bill punctuates accordingly:

      Let’s try actual common sense instead of metaphors that are economically illiterate. Let’s try real economics. Let’s stop talking about “mountains of debt” as if they represented a crisis for the U.S. and stop ignoring the tens of millions of working class Americans and Europeans whose lives and families were treated as austerity’s collateral damage and were not even worth discussing in Obama’s ode to the economic malpractice of austerity. Austerity is the old tired battle that we repeat endlessly to the recurrent cost of the working class.

      (Much of) Economics orthodoxy is the rejection of common sense and the acceptance of fallacy.

      1. Seth

        (Much of) Economics orthodoxy is the rejection of common sense and the acceptance of fallacy.

        Brings to mind the old joke about the economist who says, “That’s all very well and good in practice, but how does it work in theory?”

  2. Chauncey Gardiner

    Seems to me that Ryan is not Trump’s principal impediment, that Trump knows this, and that the battle lines are already in the process of being drawn. Veiled threat?.. or, “Let’s make a deal”?

    “In addition, with the debt-to-GDP ratio at around 77 percent there is not a lot of fiscal space should a shock to the economy occur, an adverse shock that did require fiscal stimulus,” she said.

  3. oho

    ‘Each of the economists speaking on these subjects in Kilkenny opposed Trumps election and believe it will harm the public’

    hmmm, sounds like Trump will win 2020 in a landslide.

    1. Yves Smith Post author

      Huh? That’s accurate. She called half of Trump supporters “deplorables” and her campaign and surrogates as the white working class, even though Trump’s support was broader than that. And she and her surrogates have continued to depict Trump voters as “stupid” meaning uneducated, and bigots.

      1. anti-social socialist

        It is a lie to state that Trump supporters were white working class. They were white across all levels of income.

        Anyone who posits that Clinton was using deplorable to characterize people by a certain income level and not their by hate is purposefully distorting context.

        If you have a link to Clinton depicting anyone as “stupid” I’d love to see it. As for “bigot” I think since the election some Trump supporters by their actions have very clearly self-identified that way.

        1. pretzelattack

          if so, that’s a lie that a number of clinton supporters and surrogates have advanced. i can’t count the number of times i’ve seen people advancing arguments against clinton’s policies, which by the way are very harmful to the working class, of all ethnicities, get branded as racists or misogynists or simply stupid. i’ve seen these kinds of talking points catapulted by every clinton campaign propagandist, from daily kos to the guardian, and i’ve never seen the clinton campaign disavow them. i have seen emails showing that the clinton campaign worked closely with these surrogates.

          as a left winger, i’m very concerned about the assault by dinos like clinton, and republicans in general on the american working class. you seem to argue that clinton gave herself (but not her surrogates) sufficient cover in this speech by also alluding to some percentage of trump voters who were worried about the economy, but that doesn’t really seem significant, because the broad thrust of clinton’s policies and clinton’s campaign obviously supported the assault on american workers. in that context, it’s clear to me who she regards as deplorable (americans who aren’t in the financial elite), who she regards as useful idiots (many people who voted for her), and who she actually admires and supports, a smorgasbord of warmongers, billionaires, financial criminals, and the upper few percent that support them.

          1. anti-social socialist

            Would be happy to look at links where Clinton surrogates have called white working class voters “deplorable.”

            “The broad thrust of clinton’s policies and clinton’s campaign obviously supported the assault on american workers?”

            ?? Again, links?

            1. wheresOurTeddy

              See: economic results for non-oligarchs, 1993-2016

              Further reading: economic results for non-oligarchs since 1980

              1. anti-social socialist


                Link to spots in 2016 Democratic platform (composed in large part by Bernie btw) that assault white working class or imply they are “deplorable?”

                1. aab

                  You’re delivering a rolling meadow of straw men, blowing and shifting as needed. And contradicting your own position as you go. That takes a certain kind of skill. Have you applied to The Center for American Progress? Or are you already employed there?

                  The Clinton campaign relentlessly portrayed all opposition to her ascension as the result of being at best very stupid and at worst an irredeemable person who is racist or sexist just innately — not because they have been starved and humiliated and live in an incredibly racist, patriarchal culture where that paradigm is offered to them specifically to avoid them recognizing that it’s NOT people of color and women taking their jobs and benefits away, it’s rich people who are mostly white men. That same racist paradigm that Clinton has richly benefited from.

                  The fact that you’re resorting to “Oh, she didn’t use “deplorable” in the platform,” that was publicly voted on and offered up some sops to the Sandernistas shows that you are either very dull-witted yourself, or intentionally arguing in bad faith. You know what else wasn’t in the platform? A clear repudiation of “free” trade deals, including TPP. They refused to vote for her on policy grounds, whether or not they stayed home or cast their vote for someone else. Yet the drum beat throughout the campaign was that the ONLY reason people opposed her — whether it was Sanders supporters from the left or Trump supporters from the right — was that they were racist and sexist. If you didn’t notice that, I don’t know how to help you. Find better information channels.

                  And what doesn’t seem to be discussed much still is that Obama’s big bank/big corp only rescue ALSO brutalized small business owners. That was a big Trump demographic, IIRC. I’m a leftist, but I had a company and it was crushed by the way the bank rescue was executed. So was my husband’s partnership. Lots of people who aren’t “working class” were still severely damaged by the Democrats’ policies, and are right to seek change. That they probably won’t get it from Trump is a failure of this system and a failure of the Democratic elite, for shoving Clinton into the nomination, refusing to recognize that they needed to change to course to retain power and coincidentally stop destroying the citizens of this nation, elevating Trump for shits and giggles, and then running a horrendous campaign that exacerbated societal tensions in a really dangerous way.

                  What kind of socialist defends racist oligarchs?

                  1. Griffith W Jones

                    Absolutely agree with aab. Overturning Citizens United also did not makke its way into “the most progressive Democratic Party Platform in history”.

                  1. Cry Shop


                    I’d tell anti-social to also stop being lazy and do it’s own googling. Loads of links, they even went to of-shore sites like Japan Times to do their shouting down.

          2. tegnost

            In defense of your defense, pretzel, let’s not forget that every word that came out of her mouth started out as a post it on a very smart wall


            Oh, please. Just stop. She probably does really think just that about the yowling white trash in the red states that she referred to as “deplorables” and who may or may not be aptly described as “white working class**,” but that’s not what she said. Even HRC isn’t that stupid.

            **Apparently the new holy of holies and One True Victim.

        2. OpenThePodBayDoorsHAL

          Too bad the pesky “facts” get in the way of your otherwise perfectly-workable race narrative. Oops, looks like the voters that put Trump over the top were anything but white. But soldier on, Anti, remember Love Trumps Hate.

          To quote from the article:
          Trump made gains among blacks. He made gains among Latinos. He made gains among Asians. The only major racial group where he didn’t get a gain of greater than 5% was white people. I want to repeat that: the group where Trump’s message resonated least over what we would predict from a generic Republican was the white population.

          Nor was there some surge in white turnout. I don’t think we have official numbers yet, but by eyeballing what data we have it looks very much like whites turned out in equal or lesser numbers this year than in 2012, 2008, and so on.

          1. wheresOurTeddy

            By Clinton-can-never-fail-she-can-only-be-failed logic, that means….Romney more racist than Trump…?

        3. a different chris

          Ok, if it makes you happy, how about “She also stupidly managed to insult the working class as “deplorables.”

          Because no matter what she, in all her so-precise and calibrated ways, meant that’s what everybody heard.

          PS: I think she for once meant exactly what we thought we heard, what Yves said she meant, but again I’m willing to make you happy if it gets you to move on.

          1. anti-social socialist

            You know, just to be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right? The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it. And unfortunately there are people like that. And he has lifted them up. He has given voice to their websites that used to only have 11,000 people, now have 11 million. He tweets and retweets offensive, hateful, mean-spirited rhetoric. Now some of those folks, they are irredeemable.

            But yea working class, er something…CDS alive and well at NC.

            1. Vatch

              Okay, I’ll bite. What does “CDS” mean? I’m pretty sure in this context it’s not Credit Default Swaps.

              1. Procopius

                I know, I know, call on me! “CDS” stands for “Clinton Derangement Syndrome.” That’s the condition where whatever is stated about a Clinton proves that they are guilty of something. Whatever they say doesn’t mean what it sounds like but in fact means that they are somehow dishonest and corrupt.

              2. Foppe

                S/He’s a troll, for their sake I hope they’re paid to do so, rather than offering their services for free. CDS = “clinton derangement syndrome”; it’s a ‘thing’ among the respectable class and its aspirants. Not all that oddly, it’s an attempt to pathologize by attaching a identity-political label to someone, which is “recognized” by “those who matter” — other members of the aforementioned club — as a sufficient reason to ignore the person tagged with it. It’s supposed to make you cry/weep (though not because you despair for them).

                1. anti-social socialist

                  No, I wasn’t hoping anyone would weep. Hilarious.

                  Yves/Black said Clinton called working class voters deplorable. Clearly, from Clinton’s own words, quoted in entirety above, she didn’t. Now if some (many) here want to argue she thinks that based on other words or actions fine. A different argument to have.

                  Also, Lambert, your “math” argument if I’m not mistaken, is based on Trump’s supporter makeup after election? Are you positing that Clinton, whose polling folks had everything wrong, was clairvoyant there?

            2. Optimader

              “…you could put half of Trump’s suuporters into what I call the basket of deplorables. …”

              You nailed it , this is the precise moment she set off the scuttling charge on the SS Clinton

              1. NYPaul

                What made that “deplorables” remark all the more damaging was that it wasn’t said to an audience of average, everyday working people (or, even students/millennials) but to a group of stodgy, wealthy donors.

                And, now, I’d like to make a statement regarding actual, “deplorables.” The common slur against Trump’s supporters was that this group of approximately 50,000,000 supporters were all, or, almost all, racists, homophobes, blah, blah, blah. Yet, in the real world almost everyone is a racist to one degree or another. For example, I doubt interracial marriages come anywhere near the mathematical ratio that this demographic exists in the real world. Does that make us racist? yeah, to a slight degree I guess. But, to most people it makes us simply normal. I know many, many people who have said some awkward words/things, but, would never, ever act out in an untoward manner.

                And, that Hillary, and her campaign were so thoroughly stupid as to think she could win a national election while rejecting such huge demographic groups was just breathtaking.

            3. pretzelattack

              oh i see, a socialist who is very worried about clinton derangement syndrome. that is…odd. and who manages to ignore the actual policies clinton supports (her private position), and concentrate on her public positions. relying on the democratic platform as evidence for her positions is about as reliable as relying on the corporate mission statement of british petroleum as evidence they weren’t responsible for the spill. after all, it was their public position.

              1. JTFaraday

                Yeah, no. Really, even people who basically agree with this line of criticism of HRC, the D-Party, and “identity politics” can’t listen to it any more. It’s becoming reactionary.

                Enough already. Take an internet vacation or something.

        4. lin1

          It was actually Bill Clinton campaigning for his wife who broke this “deplorables” comment and he was talking specifically, at that time, about white, working class Trump supporters in West Virginia and Kentucky. The meaning of the comment could not have been more clear. To add injury to insult, the context was that he was chastising them for being supporters of reactionary politicians and voting against their own interests..Any working class person who voted for Bill Clinton, certainly wound up voting against self. .

      2. Seth

        No, Yves. This is what she said:

        You know, to just be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right?


        The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it. And unfortunately there are people like that. And he has lifted them up. He has given voice to their websites that used to only have 11,000 people — now how 11 million. He tweets and retweets their offensive hateful mean-spirited rhetoric. Now, some of those folks — they are irredeemable, but thankfully they are not America. But the other basket — and I know this because I see friends from all over America here — I see friends from Florida and Georgia and South Carolina and Texas — as well as, you know, New York and California — but that other basket of people are people who feel that the government has let them down, the economy has let them down, nobody cares about them, nobody worries about what happens to their lives and their futures, and they’re just desperate for change. It doesn’t really even matter where it comes from. They don’t buy everything he says, but he seems to hold out some hope that their lives will be different. They won’t wake up and see their jobs disappear, lose a kid to heroine, feel like they’re in a dead-end. Those are people we have to understand and empathize with as well.

        Emphasis added.

        Video and transcript are here:

        I am no Clinton fan at all. I supported Sanders in the primary and think Hillary and Bill Clinton, as well as Barack Obama, have a lot to answer for.

        But please do not stoop to misrepresenting Hillary Clinton. There are all too many valid criticisms you can make—including the fact that with her policies she pretty much promised to keep letting them down. She was the most unpopular Democratic nominee for very good reasons.

        1. zapster

          Those ‘websites’ have been ballooning steadily over the years as fearful people have seen their lives disintegrating and were unable to express those fears anywhere else. And Clinton’s (and Obama’s) policies did absolutely create those people. The utter irresponsibility of Dem’s condemnation of them is why Trump won. You don’t ease people’s fears and change their minds by insulting them and driving them deeper into poverty.

        2. Code Name D

          Forgive me, but isn’t that precisely what Yves accused Clinton of saying? “you could put half of Trump’s supporters into what I call the basket of deplorables.” A direct cut and paste from your selection. This isn’t’ miss-representing her at all.

          I take this as a forward admission of Clinton’s classism, a set bias against conservatives in general. They are not concerned about their jobs but are just racist-sexist-or whatever perceived sin those on the left can imagine and project onto the underclass. She might as well called them sinking lepers as near as I can figure.

          As if a racist isn’t concerned about his or her job, or doesn’t have a right to be concerned about their job. Hell, we know that difficult economic times tend to exacerbate existing racial divisions. But in Clinton’s mind, these people are “not America”, also taken from your selection.

          Seems to me this particular criticism is spot on.

          1. Seth

            I’m so very sorry. You’re absolutely right and I’m wrong. I misread Yves’ comment. It was late at night.

            I was really reacting to Yves’ statement that the following was accurate:

            She also famously insulted the working class as “deplorables.”

            It’s an exaggeration to say that she insulted the working class in general. She characterized half of Trump’s supporters as racists, sexists and what have you. She seemed to have a pretty good understanding of where other people were coming from and seemed to agree. Too bad she didn’t offer much in the way of solutions for their distress. But then, she couldn’t, could she, since she’s an austeritorian.

            And of course, it wasn’t 50-50. For example, she leaves out the group that don’t like and don’t trust her and would vote for a yellow dog before they would vote for her. It was a dumb thing to say. And spoken like an incurable, out-of-touch elitist.

            Yet another way she beat herself by trying to be too clever. It was apparently an attempt to motivate her base while reaching out to the other side. But since when is it smart to campaign against your opponent’s supporters? That’s punching down. Why not just attack Trump for hate-mongering and go on to promise a huge jobs bill that would help people who have been suffering far too long?

        3. Lambert Strether

          Exactly like Obama’s “bitter”/”cling to.”

          It’s exactly the off-the-cuff “gross generalizations” that show what’s in these people’s hearts.

          Not the subsequent lawyerly parsing.

          1. Seth

            Obama was right, though. And then proceeded to ignore those very same people for two terms as president, just like his predecessors did. And I say that as someone who is on the side of those voters. What has been done to them is criminal.

            When neither party gives people hope of any economic recovery, and both parties implement policies that continue to destroy industries crush human beings, what would you expect them to cling to? Those voters have every right to be bitter. I’d be bitter, too.

            1. aab

              No, he wasn’t “right.” His wording was incredibly condescending. And as with Clinton, there’s nothing in there acknowledging that their livelihoods and often the very ground under their feet has been stolen from them by the ruling class.

              “…or anti-trade sentiment as a way to explain their frustrations,” is how he ended that little doozy. So again, he is pretending that opposition to “free” trade isn’t a rationally based position — when it clearly is — and he’s making it about emotions, as the New Dems always do. The number of times I read the framing in the Clinton campaign, Democratic leaders, and corporate media this year that voters “feel” left behind or “feel” their situation isn’t good was absolutely maddening, because it was perfectly consistent. Not once did a single one of them admit that communities have been devastated, and lives destroyed, in some cases ended, because of decisions made in Washington and New York. No, it’s just those silly losers’ “feelings,” because we live in the best of all possible worlds, and anybody in America who works hard can go to Princeton, Columbia, or Harvard, and if they speak sweetly enough to the right rich people, they, too, can become President. If they can’t do that, they deserve to die.

              My stridency isn’t intended for you. I realize that you understand the voters’ position here. But Obama’s statement was truly revealing, and not in a good way.

              1. Seth

                Well, I agree with you about the condescension:

                “…or anti-trade sentiment as a way to explain their frustrations,”

                That statement annoyed me, too. “Cling” was a poor choice of words as well.

                But as I read the whole statement, not just the sound bites that people excerpt, Obama WAS saying that the people had good reasons to be upset, that every four years, presidential candidates come around and say they’ll fix things and that neither Democratic nor Republican administrations have ever actually helped. And that it’s been going on for decades.

            2. Lambert Strether

              No, Obama wasn’t right. He was denying those voters agency. This from a guy who spent a couple of weeks navel-gazing about whether to throw Reverend Wright under the bus. No difficulty about his own agency!

        4. anti-social socialist

          Thank you for this. As you say, enough that is real to go after HRC for this electoral loss w/o misrepresenting things.

    2. Lambert Strether

      Certainly Politico thought it was true.

      And if half Trump voters were deplorables, as Clinton said, there’s no way that can’t refer, in large part, to the working class. The numbers won’t add any other way; there aren’t enough professionals and local bourgeois to make up half his vote.

  4. Enquiring Mind

    Sovereign currency defense appears to be the primary job for the US both domestically and internationally. There is a house of cards tenuous aspect to the US policies, with looming questions about the ongoing stability of the domestic economy and society. Threats to that sovereign position would seem to be present over the long term from China in particular. To what extent does currency defense justify any manner of harmful policies, certainly given the perceived ends justify the means tacit assumptions?

    1. Oregoncharles

      I suspect you’re confusing “sovereign” currency with “internationally dominant” (d….it, can’t recall the word) currency.

      “Sovereign,” in this case, means that the country creates the currency on its own terms. Argentina’s is (now) just as sovereign as the US’s. But it wasn’t when they got in trouble by “pegging” theirs to the US dollar.

      It’s in contrast with the countries using the Euro, since they have no control over it and can’t “print” to suit their own policies. (Apparently they do each literally print the paper bills, but under the European Central Bank’s control.)

      1. Enquiring Mind

        My comment was referring to the use of the term sovereign currency by the author.

        Readers of New Economic Perspectives understand why UMKC academics and non-academic supporters have long shown that austerity is typically a self-destructive policy brought on by a failure to understand how money works, particularly in a nation like the U.S. with a sovereign currency.

        1. ChrisAtRU

          Sovereign in this case merely means that the currency is a national currency monopoly – currency that can only be issued by the sovereign nation state. So the USD, Yen and Pound Sterling are sovereign currencies. The Euro is not.

          See here for further reading.

  5. jgordon

    Stimulus is awesome in theory. But it’s unlikely that those making decisions about where stimulus goes will make either honest or wise decisions. This is with the understanding that earth’s resources are limited, and if they are too mismanaged that’s a mass extinction event in the offing.

    Right–the ultimate result of bad economic dedicions is not a poorly run and inefficient economy where most people suffer in poverty; it’s the end of most life on earth. Maybe in a few million years the cockroaches and jellyfish that survive our economic stimulus measures will evolve some self awareness, but we won’t be around any more.

    1. a different chris

      >that earth’s resources are limited

      Right – even if they weren’t, the shorter form of your second paragraph could be “you can’t eat an F-35.”

      PS: I’m getting pretty convinced that octopus’ have the self-aware thing pretty down pat.

    2. TK421

      That’s absurd. We shouldn’t repair bridges and update sewers because it will increase pollution? Please.

  6. RabidGandhi

    I tremble to nitpick at the always excellent Bill Black, but

    ….the economy was saved by the hyper-inflation of the housing bubble…

    The oil-shock inflation hit a peak of 16%, and that was just high inflation, not hyper-inflation by any stretch of the imagination. The housing bubble produced a peak inflation of 6% in 2007, which is just slightly higher than the average inflation in the 60s and the 80s, and obviously well below the 70s.

    Yes 6% is much higher than the current stagnant levels, but “hyper-inflation”? 6% now would be a godsend, not Zimbabwe.

        1. Procopius

          No, I agree with you. It was a very bad choice of words and quite startled me when I saw them because Bill Black is one of the few people whom I consider to have their head screwed on straight and “tells it like it is.” Usually “hyper” is used when you’re trying to stampede your readers with panic.

          1. Foppe

            well, there is a good case to be made that housing price inflation is always undesirable from the personal perspective, ignoring the few who time their buying and selling right; why on earth would anyone want to have to pay 30-40% of their (household) inceme to a bank just so they have a roof over their head, when they could also pay, say, 15% (as renters do in germany)?

  7. sharonsj

    I would like to add that progressives such as myself didn’t believe Hillary’s usurping of Sanders’ stance on issues to be anything more than a cynical ploy to get his supporters votes. We also knew that the characterization of her policies as “incremental” was double-speak for “more of the same.” I have been watching since the 2008 financial implosion as both government and media ignored what was actually happening outside their corporate bubble. We had massive price inflation which was never covered in the news. Most of the people who lost their homes were never helped. And 99.9% of those who got filthy rich via fraudulent means never went to jail. And then the Democrats wonder why so many people are enraged.

    1. weinerdog43

      Well said.

      Not only never went to jail, they were never even charged.

      This begs the question of why we even have a Justice Dept.? I think that a huge amount of the control fraud that went on (and is likely continuing), would have been curtailed with even a few selective prosecutions or even the occasional indictment.

    2. Oregoncharles

      Another translation of “incremental” would be “half-assed,” the Clinton trademark. Meaning not only inadequate, but essentially fake.

      And I would add: not nearly enraged enough. They stuck with the 2-Party paralysis, albeit decorated with in-your-face antics.

  8. juliania

    I like this one better than the last one – have been trying to introduce this aspect of economics into the conversation, and Bill Black makes the point well in this article – thank you, Bill! The critique of Obama’s State of the Union speech is excellent. Ordinary struggling people have some reason for hope, and indeed the issue of austerity is a proven disaster on the governmental level, as has been pointed out on this forum. I think the policies Trump wants to put forward have a good chance to succeed, and that will win him the public support his early presidency needs. This is not about parties, or should not be. This is about righting the ship of state.

    I was reading about the ‘plimsoll line’ a while back. I hope that ship hasn’t lurched beneath it. All hands to the opposite side!

    1. Procopius

      I’m glad to have the critique of Obama’s speech because it was quickly forgotten. Look back over discussion of why the “recovery” was so weak and sluggish and you’ll never see any mention of Obama’s pivot to austerity. The silence puzzled me for years. It was really a very well regarded policy choice at the time. Sure, people who comment here recognized that it was a disastrous choice, but most people thought it was the proper thing to do.

  9. juliania

    My previous comment is awaiting moderation.

    Thank you, Mr. Black. You have answered questions I had about the article last week by Dean Baker at (can be accessed using the search function there.)

    1. Oregoncharles

      For future reference: can be accessed faster if you give the title. I realize you’re avoiding a link. I read it, so this is just a technical tip,

  10. Synoia

    Republican espousing policies which help the working class?

    Not until the have overfilled the trough of the ruling class. The noise around infrastructure is “public/private partnerships” which one understands is a key phrase in future rent extraction.

    1. le

      I agree, in general, but we may be facing a special case. My understanding is that vast sums are stashed abroad or tied up in the Wall St. casino, rather than actually being reinvested. If some of those funds can be drawn into public-works investment, I think the effect would be much the same as direct public investment – certainly a more efficient approach.

      There are undesirable repercussions, like rent extraction, but at least the funds would become stimulative.

      Incidentally, this is an omission in Black’s article: the forms of spending Trump is proposing are the LEAST effective as stimulus. He couldn’t say everything.

      1. TomDority

        “I think the effect would be much the same as direct public investment – certainly a more efficient approach”
        How would it be more efficient?

        “There are undesirable repercussions, like rent extraction, but at least the funds would become stimulative.”
        Would become stimulative, does that mean public investment in infrastructure was previously not stimulative?

        Most investment is the US is in stock buy backs and other forms of non productive investment….vast sums overseas are a result of avoiding taxes…so, how does one draw them into public works?

        1. Oregoncharles

          Somehow typoed my name.
          Also was unclear: public investment would be more efficient, mainly because of the rentier effects. Also that the hoarded PRIVATE funds (I’m avoiding the term “money,” since it seems to be vexed) could become stimulative if drawn into public-works investment. I just think that the public-private model might be a way to get some of those hoarded private funds back into circulation.

          I’m trying to say that the public-private model Trump seems to favor, while not ideal, might have some advantages in this specific situation. Basically, the concept is to use small public funds as seed money to attract private investment. The trouble is, the public assets wind up privatized, at least long enough to yield a return on investment. It’s abnormal to have such large amounts kept out of circulation in private hands, so this wouldn’t normally be a useful strategy.

          I trust it’s clear that I’m speculating – hoped for some clarification on the point. but first I have to make it clearly.

          1. tegnost

            as much as I think individuals at all income levels may be heavily taxed as is, I do not want apple, GE, microsoft, pfizer, IBM, merck, j+j, cisco, exxon, google, p+g, citi to get a pass on their offshore(onshore, see nevada) cash hoard to get a break for any reason anyone can conjure up. I’d rather see receipts for plants you sold, OC, work you did in state, people you hired, be a tax write off for individuals who hired you to do the work.Eff those effers, make em pay because they sure as h e double hockey sticks make everyone pay them. Infrastructure for those useless eaters is a new bmw

  11. craazyman

    How could you have a festival of “economics” AND “comedy”? Isn’t that redundant?

    Sounds like a comedy festival featuring stand-up economists.

    Take my DSGE, please! rim-shot.
    Whoa. I said to my wife “Would you leave me if I changed my mind about the deficit?” She said ” You have a mind?” Whoa! Rim-shot
    Economists get no respect. Just yesterday an economist said a country that’s a currency-issuer can’t default on its debt. Nobody cared! Whoa! Rim-shot.
    No respect at all. Even from their dog.
    An economist was out walking his dog and the dog stopped to sniff a fire hydrant. “That’s public spending at it’s best” the economist thought. Then the dog peed all over it. Whoa!
    How many economists does it take to find one that makes sense? Nobody knows,they’re still counting! Whoa!

    1. susan the other

      stand up economists step aside. Beppe Grillo himself called Trump (almost affectionately) a “corn cob” because he is so socially blunt, but even Grillo knew Trump had the right idea. It doesn’t have to become a standoff. I think Trump could unleash the “criminogenics” if we were all 10 years dumber. We’re a lot more sophisticated than we were in 2008.

  12. clarky90

    This is an extract from “One Day in the Life of Ivan Denisovich” by Aleksandr Solzhenitsyn

    “Two men operated the kitchen—a cook and a “hygienist.” The cook was given a supply of meal in the big kitchen before leaving camp in the morning. Maybe fifty grams a head, a kilo for every gang, say a bit less than a pood for the whole site. The cook wasn’t going to carry a sack of meal that heavy for three kilometers, so he let his stooge do it. Better to give the stooge a bit extra out of the workers’ rations than to break your own back. There were other jobs the cook wouldn’t do for himself, like fetching water and firewood, and lighting the stove. These, too, were done by other people, workers or goners, and the cook gave each of them an extra portion, he didn’t grudge what wasn’t his own. Then again, men weren’t supposed to take food out of the mess. Bowls had to be brought from camp (you couldn’t leave them on the site overnight or the free workers would pinch them), and they brought only fifty, which had to be washed and passed on quickly. So the man who carried the bowls also had to be given an extra portion. Yet another stooge was posted at the door to see that bowls weren’t carried out. But, however watchful he was, people would distract his attention or talk their way past him. So somebody had to be sent around the site collecting dirty bowls and bringing them back to the kitchen. The man at the door got an extra portion. And so did the collector.

    All the cook had to do was sprinkle meal and salt into the caldron and divide the fat into two parts, one for the pot and one for himself. (Good fat never found its way to the workers, the bad stuff went straight into the pot. So the zeks were happier when the stores issued bad fat.) Next, he stirred the gruel as it thickened. The “hygienist” did even less — just sat and watched. When the gruel was cooked, he was the first to be served: eat all your belly can hold. The cook did likewise. Then the foreman on duty would come along — the foremen did it in turn, a day at a time — to sample the stuff as if to make sure that it was fit for the workers to eat. He got a double portion for his efforts. And would eat again with his gang.

    The whistle sounded. The work gangs arrived one after the other, and the cook passed bowls through his hatch. The bottom of each bowl was covered with watery gruel. No good asking or trying to weigh how much of your meal ration you were getting: there would be hell to pay if you opened your mouth.”

    1. Inode_buddha

      Its amazing how much this reminds me of work. Rust belt skilled trades FWIW. For that matter itt reminds me of the local community, the landlord…..

  13. ChrisPacific

    The problem is that the household debt/government debt analogy is intuitive, easy to understand and even seems to have a logical foundation to it (obviously there must be some kind of limit on government spending whether explicit or implicit, or we would just give everyone a million dollars and end poverty). I used to be a believer myself, and spent a while arguing with the MMT columnists before I finally understood their argument. And if fiscal stimulus happens to be one thing that economists are right about, they have such a history of ignoring empirical evidence and being wrong about other things that it’s not surprising that nobody listens to them.

    Until we can come up with a counterargument that is equally intuitive and understandable, then we will continue to be vulnerable to people in power with short attention spans, limited time, and limited background in the subject (like presidents) making wrong decisions.

  14. Edward

    “It may be important to point out the obvious – Obama chose to make each of these appointments and there is every reason to believe that he appointed them because he generally shared their views on austerity.”

    One of the emails released a few weeks ago revealed that Obama’s appointments at the start of his presidency were dictated by Wall Street. This might also have been true of his later appointments.

  15. ekstase

    Where can we get tickets to your show? Cause seriously, get a couple drinks in people, and this is some good stuff!

      1. tegnost

        no man is an island unto himself, except for craazyman, whose clarity of mind comes across as a constant microdose, all hail craazyman for his mindfulness, which seems to never sleep or fall into the mundane….

  16. Roland

    As I see it, Austerity itself is not the problem.

    The problem is the distribution of the Austerity.

    During the recent so-called “austere” periods, only the petty bourgeoisie and the proletariat have actually encountered Austerity.

    The big bourgeoisie, on the other hand, have enjoyed a lengthy and unprecedented period of Stimulus. They got monetary stimmulus like it’s never happened before. The bourgeoisie also got fiscal stimulus in the form of tax cuts, 3P opportunities, and enhanced global protection for investor rights. Never have rich people enjoyed so much access to so much cheap money, while enjoying so much protection for unlimited property ownership, and paying so little in taxes. Never have sovereigns worked so hard to pamper and nurture the upper class.

    So how can anyone, in all honesty, refer to our period as “Austere” ?

    In other words, we’re not actually in a period of Austerity. Our problem is that the central authorities are deliberately stimulating the bourgeoisie while burdening the proletariat.

    The pro-Stimulus arguments found here advocate for an economy founded on permanent debt expansion, in both good times and bad.

    1. This basically admits that as long as your society includes such a thing as a Bourgeoisie, a Sovereign is always going to have to artificially compensate everybody else for the intrinsic social cost of supporting a class such as the bourgeoisie. But since the Bourgeoisie are the most politically powerful class in a capitalist society, how could anyone but a naïf expect the Sovereign to offer the rest of society appropriate compensation on any sort of logical or consistent basis?

    2. Another set of problems with the policy approach of permanent Stimulus is that it tacitly assumes that productive resources are always underutilized. The Permanent Stimulator permanently desires to employ the unlimited power of the Sovereign to ensure that all possible resources are utilized to the maximum.

    (a) why assume that maximizing the production of goods and services should be the prime desidaratum?

    (b) who gets to decide when any given resource is underutilized? Why shouldn’t labour be “underutilized” ? Why shouldn’t lands and waters be “underutilized” ?

    The problem with MMT is that there must come a time when stimulus comes in the form of the overseer’s lash. Anybody who fails to maximize their production of goods and services gets punished by inflation. Natural systems get constantly tested to their limit, even by those who are fully aware that there can be such limits, and of the costs of exceeding those limits.

    This desire to eternally maximize production of goods and services is itself a trait of the bourgeois class. The idea of using monetary expansion as a means to overcome all impediments to maximum production, is a trait of the bourgeosie in a phase of finance capital.

    Is it worth it for a benevolent Sovereign to use MMT, i.e. to take such risks and impose such burdens, simply for the sake of compensating other classes for the intrinsic social costs of having a bourgeoisie? Is having a bourgeoisie something we can afford in the long term?

    If we do Socialism, then we can have any sort of monetary system, hard money, soft money, whatever. That becomes a technical matter.

    The desire to find technocratic monetary policy solutions to the problem of class struggle, is evidence in itself that our intellectual culture is a “superstructure” formed in a time of finance capitalism.

    1. Code Name D

      >> During the recent so-called “austere” periods, only the petty bourgeoisie and the proletariat have actually encountered Austerity.”

      As if “austerity” isn’t’ well-defined here, it’s having the state maintained a balanced or surpluses budget, and the reining in or out-right dismantling social safety nets as the primary tool to achieving this end. You don’t get to simply pretend the definition of austerity has magically changed in order to support your point.

      >> The pro-Stimulus arguments found here advocate for an economy founded on permanent debt expansion, in both good times and bad.

      You do not know what stimulus is. All stimulus argues is the necessity for monetary expansion in times of economic down-turn. MMT takes that a step further and argues that a certain amount of public debt is required to maintain an adequate supply of currency for the economy to remain healthy. Instead of the more traditional stimulus argument that deficit spending needs to be curtailed once the crises has passed, usually precipitating another crises.

      >> 1. This basically admits that as long as your society includes such a thing as a Bourgeoisie, a Sovereign is always going to have to artificially compensate everybody else for the intrinsic social cost of supporting a class such as the bourgeoisie.


      >> 2. Another set of problems with the policy approach of permanent Stimulus is that it tacitly assumes that productive resources are always underutilized. The Permanent Stimulator permanently desires to employ the unlimited power of the Sovereign to ensure that all possible resources are utilized to the maximum.

      Another strawman. MMT does not argue that stimulus is needed in order to reach full productivity. It argues that an inadequate currency in circulation causes an artificially depressed economy, where existing needs are not met simply because it lacks the means to pay for the necessary labor and materials. MMT argues that capacity to meet demand shall adjust according to demand itself. Growing demand shall produce a crowing capacity to meet that demand. But a prolonged recession will contract capacity, creating an additional cost for recovery.

  17. Jim

    Fiscal stimulus is critical but it is only one element of macroeconomics and no one was comfortable with Trump’s long-term control of the economy.”

    If we have collectively succeeded in concentrating too much power in the executive branch of government then don’t we need to develop a political theory of the state that does a better job of institutionalizing democratic control before allowing the enormous inherent power of fiat money into the hands of a new Trump administration or, possibly down the road, a new progressive/left administration centered around MMT?

  18. steelhead23

    There is another assumption broadly used in economics we should find a way to avoid, or at least use less – growth as the desired outcome of economic activity. I feel on shaky ground here, as I am certain others have considered this issue academically. In short, the desired outcome of national policies of all kinds is happiness. Happiness and growth are not synonymous. After all, isn’t the US GDP growing (albeit slowly)? Yet, broadly, we are not happy. Our beef (at least my beef) is that that growth has been in the unproductive FIRE sector. That growth has increased the wealth at the top of the income pyramid, which has adverse effects on happiness below. Inexorably, wealth brings power and income inequality leads to power inequality – an engine of unhappiness. And let us not forget that resources are finite, meaning that economic growth must come to an end someday. I suppose our fine freshwater economists would laugh even harder were the heterodox to see maximizing happiness as the goal of economic activity. So what? I note that people in Scandinavia (Denmark, I believe) have been identified as the happiest people on the planet, yet, in terms of GDP and the rate of economic growth, I’d bet they are far from the top.

    1. aab

      This aligns with my assertions in response to earlier posts that capitalism is inherently predatory, and that predatory nature is not addressed honestly enough in a lot of economic theory and discussion. Why does the economy have to grow? Is it required for any other reason than so the rentiers can take their extra slice off the top?

      And yes, that same degree of growth, if it was being channeled back into the productive economy to benefit the majority of citizens, would result in dramatically improved outcomes for most people. 2% GDP vs. 4% GDP seems irrelevant to me when the system is set up in such a way that much of that value is sluiced away into hidden accounts and stores of value like high art.

      1. makedoanmend

        “…that much of that value is sluiced away into hidden accounts…”

        Love the use of the word sluiced in an economics article. It has a certain onomatopeic quality to it in relation to capital hoarding.

        Of course when the sluice gates are opened a certain ju ju occurs. I believe this is what the working classes (of all stripes, including the self employed in my book) like to think as trickle down economics. The capital hoarder unleashes a little water to create energy in order to create capital (or rather capture labour created capital – tickle down capital) in order to hoard yet more capital.

        It’s amazing how a word can evoke more than its intent, even invoking real emotion from such a static symbol.

        I currently belong to a club exploring the connections between art and science – tyring to draw the seemingly different disciplines back under the umbrella of human humanity. As this project proceeds, I now see more and more connections, and not just between these disciplines.

        thanks aab

        1. aab

          Thank you for the compliment.

          I’m in favor of reuniting the humanities and the sciences in a more intimate and egalitarian union. When I was in high school, I maxed out my math classes as a sophomore, and my school wouldn’t let me walk to the nearby college to keep going, because the school treated math and science as something minimally necessary, like flossing. I was never destined to be a professional scientist, but the attitude rankled, and I felt deprived. I still regret not taking more science when I was younger. Nothing stopped me in college, but by then, I just didn’t have the background to return to it without a lot of extra effort, which I was disinclined to do. That’s on me.

          Now, it’s been inverted. We’re told that math and science is everything and the humanities are silly, and that’s not true, either. One of the reasons I wanted to read Keynes was that he was apparently a polyglot in terms of synthesizing different disciplines, which seems to have worked better than treating economics as a pure science.

          My closest friend is a scientist. It is incredibly fun conversing as we bounce back and forth between our two focal areas.

  19. Harry Johnson

    Not a one of these eCONomists, either those in favor of austerity or opposed to it, spoke out against handing hundreds of billions and probably trillions free of charge to the so called “investment” “professionals” who crashed our economy in 2008. And absolutely none of them have advocated for the necessary remedy to the frauds that caused the crash, that being prison for the perpetrators in the finance cartels and syndicates of wall street and the city of london.

    The United States of America is the richest nation on earth. Yet for all this wealth and the claims of brilliance and genius on the part of its financiers and eCONomists we cannot assure that people have decent health care, food, housing and basic needs met? It is not the availalbility of resources or money that is the problem. It is priorities. There is plenty enough in this richest nation on earth to provide for everyone’s needs. There will NEVER be enough to satisfy the pigs in suits.

    Never tell me austerity is necessary or there is not enough as long as 800 billion dollars can be pulled from the hindquarters of nowhere to rescue the ultra wealthy hedge fund self proclaimed geniuses and bank CEOs from the consequences of their folly and misjudgments. Especially without providing special personal accomodations for them in Leavenworth, Kansas; Ossining, New York; Florence , Colorado; Guantanamo, Cuba or other appropriate, secure penal facility where society can be protected from their fraud, greed, criminality and idiocy.

  20. Dick Burkhart

    Bill Black’s call for massive stimulus is certainly welcome, but he fails to note that this does not require a massive increase in debt. All it requires is taxing the rich, and Hillary actually proposed increasing taxes on the rich to pay for infrastructure. (Note: I supported Bernie, not Hillary, and voted for Jill Stein)

    It is true that over the last couple of hundred years, using debt to finance stimulus spending was not an economic problem. You could always count on future growth to pay off the debt. No longer! We are hitting the planets limits-to-growth, meaning that much of our current debt, from local to global, will likely never be paid off. Instead it will be either inflated or defaulted away. For most of us, default is by far the preferred way.

    Almost all economists fail to understand this dynamic, because they are committed to economic growth, despite the fact that it is unsustainable. Continuing to push growth will simply hasten the next crisis – initiating long term global economic contraction. And building infrastructure for the future can be done without overall growth by shifting our spending from wasteful expenditures on the rich to this infrastructure. This would be a triple win: (1) full employment and better wages for the working class, (2) a more sustainable future economy, and (3) a much more equal society.

  21. Mickey Marzick in Akron, Ohio

    “People, particularly working class men, need jobs, not simply incomes to feel like successful adults.”

    Work = Success? Maybe this is the problem… defining a human being by what he/she does for a living and not who they are. And why is it PARTICULARLY working class men?

    This fixation on work is testament to the insidious infestation of neoliberalism/Calvinism into the minds some of “the best and the brightest” on the LEFT. Quintessentially PROGRESSIVE. Can’t help but recall Phil Ochs “Love me, love me, I’m a LIBERAL!

    Why would anyone work if they didn’t have to? Is it rational economic behavior to do so? Please explain it to me. What am I missing – a working class male?

  22. Sound of the Suburbs

    Larry Summers now ……

    “Former Treasury Secretary Summers Calls For End Of Fed Independence”

    “Central bank independence “comes from an understanding of the macroeconomic policy problem that is not relevant to current times,” Summers said in a speech at the International Monetary Fund.

    Central bank insulation was needed in the 1970s and 1980s to combat inflation, Summers said. That’s because the White House and Congress sometimes saw the short-run benefits of unexpected inflation, while the Fed kept its eyes on the long-run costs, he said.

    But that was yesterday’s problem, Summers said. The economy now faces secular stagnation, or a chronic lack of demand.”

    The demand problems are playing out, should have done more stimulus before.

    1. Sound of the Suburbs

      In the days when we put the economy first I am sure everyone will be ready to do whatever is necessary to spur demand in the economy.

      Many global voices, e.g. the IMF, are speaking out about the lack of global aggregate demand.

      Larry Summers:

      “But that was yesterday’s problem, Summers said. The economy now faces secular stagnation, or a chronic lack of demand.”

      We need to take money from the top to give it to those at the bottom that will spend it.

      2014 – “85 richest people as wealthy as poorest half of the world”
      2016– “Richest 62 people as wealthy as half of world’s population”
      Doing the maths and assuming a straight line …….
      5.4 years until one person is as wealthy as poorest half of the world.

      The global economy is heading in the wrong direction when our concern is demand.

      Warren Buffet has 73 billion, but how many cherry cokes can he drink in a day?

      I am sure he won’t mind surrendering 72 billion to fund entitlement programs to boost demand.

      It is just those at the top that have noticed the demand problem at the moment, I am sure we will all be ready to do the right thing economically when the time comes.

  23. Don Lowell

    Hillary has a penchant for saying stupid things, Trump has a penchant for lying. Both parties have worked in unison to destroy the middle class and it started with R Eagan. Summers is deplorable.

  24. Sound of the Suburbs

    Christina Romer made a mistake interpreting data from the Great Depression making her think monetary policy got the US out of the Great Depression.

    She then convinced most of the big names in the US this was the case, e.g. Ben Bernanke, Paul Krugman and Jeffrey Sachs.

    Richard Koo explains:

    First 12 mins. of video.

    By the way 1929 and 2008 are the same.

    Jim Rickards (“Currency Wars” and “The Death of Money”) has explained how the removal of Glass-Steagall allowed Wall Street to repeat 1929.

    In 1929, they carried out margin lending into the US stock market to artificially inflate its value. They packaged up these loans in the investment side of the business to sell them on.

    In 2008, they carried out mortgage lending into the US housing market to artificially inflate its value. They packaged up these loans in the investment side of the business to sell them on.

    The so called, one off, 2008 “black swan” event has a name – A “Minsky Moment”

    Minsky Moments:

    1929 – US (margin lending into US stocks)
    1989 – Japan (real estate)
    2008 – US (real estate bubble leveraged up with derivatives for global contagion)
    2010 – Ireland (real estate)
    2012 – Spain (real estate)
    2015 – China (margin lending into Chinese stocks)

    Irving Fisher looked at the debt inflated asset bubble after the 1929 crash when ideas that markets reached stable equilibriums were beyond a joke.

    Fisher developed a theory of economic crises called debt-deflation, which attributed the crises to the bursting of a credit bubble.

    Hyman Minsky came up with “financial instability hypothesis” in 1974 and Steve Keen carries on with this work today.

    Steve Keen saw the private debt bubble inflating in 2005. He had the right theory and it wasn’t a “black swan” to him.

    In 2007 Ben Bernanke could see no problems ahead and his models didn’t include money and debt. He had the wrong theory.

    1. Sound of the Suburbs

      Once you realise these are debt inflated asset bubbles bursting you can learn from past experience.

      1929 – US (margin lending into US stocks)
      1989 – Japan (real estate)
      2008 – US (real estate bubble leveraged up with derivatives for global contagion)

      Many have studied the Great Depression to see what went wrong.

      Irving Fisher came up with the initial theory of debt deflation.
      The mainstream ignores his work today.

      Steve Keen’s work is based on his work and that of Hyman Minsky enabling him to see the private debt bubble inflating in 2005.

      He says it is a debt problem that can’t be solved with more debt.
      Austerity is the worst thing you can do and some sort of debt jubilee is necessary.

      Central Bankers are using more debt to solve the problem.

      Keynes studied the Great Depression and said that monetary policy won’t work, fiscal policy is needed.

      The mainstream ignores his work today.

      He said monetary policy would just lead to a “liquidity trap”, where investors and companies won’t invest due to the lack of demand.

      Could this be the Central Banker’s “savings glut”.

      Christina Romer studied the Great Depression and she came to the wrong conclusion, it was FED stimulus and not the New Deal that pulled the US out of the Great Depression.

      No, it was the New Deal.

      This is who we follow.

      Richard Koo explains:

      First 12 mins. of the video explains the mistake she made.

      Richard Koo studied the Great Depression and Japan after 1989, a real expert.

      Austerity is the worst thing you can do.

      Fiscal stimulus coupled with low interest rates, keeps the money supply stable while the debt is paid down.

      Luckily, Ben Bernanke read his book and stopped the US going over the fiscal cliff.

      Unfortunately, Mario didn’t.

      1. Sound of the Suburbs

        Australian and Canadian Central Bankers, I am afraid it’s too late for you.

        You have let your real estate bubbles get totally out of hand.

        The Minsky moment, crash and burn of your national economies is already over the horizon.

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