What’s the deal?

January 5th, 2009

The Pubs are already obstructing the stumulus bill, which ‘Bama was hoping to put in place immediately; they have their reasons … some of them pathelogical. Perhaps to sweeten the pot and turn them, the new plan has 40% of the monies coming down in tax cuts, a number Krugman thinks too high. Moderate Pubs would find difficulty arguing with tax cuts.

Me, I think this is just the first of more mammoth amounts of money to be thrown into the system, and Paul should take a deep breath. We can’t stall our way out of it — the ‘liquid’ money that was to calm the credit problems hasn’t really been liquid, thanks to bank bail-out for their own but not the public; amazing how quickly Republicans got behind that first money-gush … like, they had a stake in it, perhaps??

I’ve lost another neighbor to this debacle — under the gun to refinance, they can’t find a lender so they’ll lose three years of on-time payments and equity; and move along … I’ll miss the light and noise of their young family terribly.

Here’s the stimulus proposal — first on our plates in a mere 15 days …

Celebrate! Celebrate! Dance to the Music!!!

… it can’t come too soon!

Here are reads including Krugman and Scher; David Sirota knocks down the whiny business about how FDR made a mess of the Depression, with good follow-up by Dean Baker. Last, a piece by Ted Rall to strike terror into the hearts of capitalist’s everywhere.

A new deal? Bring it on!

Jude

Obama’s Stimulus Plan
Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, and Ryan Powers, The Progress Report
January 5, 2009

Today, President-elect Obama is moving forward with what he has billed as his top priority: an economic stimulus package called the “American Recovery and Reinvestment Plan.” He is scheduled to meet with House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV), and possibly the Republican leaders in both chambers. In his weekend radio address, Obama said that his goal is to put together a plan that “not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term.” The package will focus on providing assistance to low- and middle-income Americans, strengthening the nation’s infrastructure, and investing in states that are struggling with falling revenues, with the goal of creating or preserving at least 3 million jobs over the next two years. Underscoring the urgency of addressing the nation’s faltering economy, Pelosi has said that her goal is to pass a bill that is ready to be signed by Obama once he takes office on Jan. 20. However, House Majority Leader Steny Hoyer (D-MD) has cast doubt on such an expedited timeline, and many conservatives are already indicating that they plan to block this progress. Obama spokesman Robert Gibbs conceded that the stimulus package is “unlikely” to be ready by the inauguration.

MIDDLE-CLASS ASSISTANCE: Over the weekend, Obama officials announced that they would like Congress to direct 40 percent of the stimulus bill toward tax breaks aimed at businesses and middle-class workers. Most workers would receive a $500 payroll credit, and some businesses would “receive incentives to create jobs and make equipment purchases more affordable.” While these cuts may be able to give the economy a kick-start right away, they are also meant to assuage skeptical conservatives. Congressional Democratic leaders are also considering unemployment benefits and health coverage to assist jobless workers, as economists predict that the U.S. unemployment rate could reach 10 percent by the end of 2009. Obama’s goal of creating 3 million jobs will be spurred by the creation of “green” jobs that would not only begin addressing the country’s energy needs by shifting to clean energy but also contribute to private sector job creation. A Center for American Progress report by Dr. Robert Pollin and University of Massachusetts Political Economy Research Institute economists estimates that by investing $100 billion over two years, the United States could create 2 million jobs, “with a significant proportion in the struggling construction and manufacturing sectors.”

INFRASTRUCTURE INVESTMENT: Another important part of Obama’s job creation plan is infrastructure investment. When a water main broke in suburban Maryland last month — trapping a dozen commuters in their cars as four feet of freezing cold water surged around them — the public received a startling reminder of the current state of the country’s crumbling infrastructure. The American Society of Civil Engineers estimates that $1.6 trillion is needed over the next five years to repair and restore the nation’s infrastructure.” As NPR has pointed out, “Every $1 billion the federal government commits to roads, bridges and other infrastructure helps to support some 35,000 jobs.” This program should repair existing roads and bridges, not pay to build new highways that would foster sprawl and increase oil consumption. “The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn’t needed,” wrote New York Times columnist Paul Krugman in October. “Well, that argument has no force now, since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.” Indeed, a November Washington Post-ABC News poll found that almost 70 percent of those surveyed said “they support new federal spending of as much as $700 billion on construction projects and other programs to try to stimulate the economy,” even if it means increasing the size of the deficit.

DIRECT AID TO STATES: As CAP has noted, a stimulus package also needs to “help states cope with falling revenues that otherwise force them to lay off workers, cut spending on critical safety-net programs, and shortchange areas of long-term importance such as education, infrastructure investment, and health care.” Several governors have already appealed to the federal government for assistance. “I firmly believe that if it took only two weeks for the federal government to find $700 billion to bail out Wall Street and bank executives,” New York Gov. David Paterson (D) told Congress, “then we ought to be able to find a fraction of that amount to help preserve essential services at the state level.” Health care, in particular, is one of the top costs plaguing the states. Currently, at least 27 states are facing budget gaps and some have already slashed safety-net programs. Medicaid consumes an average 17 percent of state budgets. Media reports indicate that Obama and congressional leaders are pushing for direct aid to states, which may “come in the form of payments that could help meet the growing costs of Medicaid spending.”

CONSERVATIVE OBSTRUCTION: Despite the urgency after eight years of the Bush administration’s do-nothing attitude, Senate Minority Leader Mitch McConnell (R-KY) has said that he and his fellow conservatives are in no rush to provide this important economic relief and plan to put the brakes to attempts to quickly pass a package. “I believe the taxpayers deserve to know a lot more about where it will be spent before we consider passing it,” he said in a statement last week. According to the Washington Post, McConnell has also “called for a weeklong cooling off period between when the bill is drafted and when it is voted on, allowing time to dissect it for signs of ‘fraud and waste.’” Conservatives have the power to filibuster the legislation if they oppose it. (McConnell, however, had no problem quickly passing President Bush’s Wall Street bailout, even though that package had almost no oversight safeguards. In fact, he “led the battle” to pass the bill.) The real risk, according to many economists, is in doing too little. Krugman, for example, has said that he would like to see a “bigger” stimulus package — as high as a trillion dollars. New York University Economics Professor Nouriel Roubini has explained that failure to enact a fiscal stimulus could actually result in wider deficits, which would send the country into a “very severe recession.” ++

Bigger Than Bush
PAUL KRUGMAN, NYT
January 1, 2009

As the new Democratic majority prepares to take power, Republicans have become, as Phil Gramm might put it, a party of whiners.

Some of the whining almost defies belief. Did Alberto Gonzales, the former attorney general, really say, “I consider myself a casualty, one of the many casualties of the war on terror”? Did Rush Limbaugh really suggest that the financial crisis was the result of a conspiracy, masterminded by that evil genius Chuck Schumer?

But most of the whining takes the form of claims that the Bush administration’s failure was simply a matter of bad luck - either the bad luck of President Bush himself, who just happened to have disasters happen on his watch, or the bad luck of the G.O.P., which just happened to send the wrong man to the White House.

The fault, however, lies not in Republicans’ stars but in themselves. Forty years ago the G.O.P. decided, in effect, to make itself the party of racial backlash. And everything that has happened in recent years, from the choice of Mr. Bush as the party’s champion, to the Bush administration’s pervasive incompetence, to the party’s shrinking base, is a consequence of that decision.

If the Bush administration became a byword for policy bungles, for government by the unqualified, well, it was just following the advice of leading conservative think tanks: after the 2000 election the Heritage Foundation specifically urged the new team to “make appointments based on loyalty first and expertise second.”

Contempt for expertise, in turn, rested on contempt for government in general. “Government is not the solution to our problem,” declared Ronald Reagan. “Government is the problem.” So why worry about governing well?

Where did this hostility to government come from? In 1981 Lee Atwater, the famed Republican political consultant, explained the evolution of the G.O.P.’s “Southern strategy,” which originally focused on opposition to the Voting Rights Act but eventually took a more coded form: “You’re getting so abstract now you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is blacks get hurt worse than whites.” In other words, government is the problem because it takes your money and gives it to Those People.

Oh, and the racial element isn’t all that abstract, even now: Chip Saltsman, currently a candidate for the chairmanship of the Republican National Committee, sent committee members a CD including a song titled “Barack the Magic Negro” - and according to some reports, the controversy over his action has actually helped his chances.

So the reign of George W. Bush, the first true Southern Republican president since Reconstruction, was the culmination of a long process. And despite the claims of some on the right that Mr. Bush betrayed conservatism, the truth is that he faithfully carried out both his party’s divisive tactics - long before Sarah Palin, Mr. Bush declared that he visited his ranch to “stay in touch with real Americans” - and its governing philosophy.

That’s why the soon-to-be-gone administration’s failure is bigger than Mr. Bush himself: it represents the end of the line for a political strategy that dominated the scene for more than a generation.

The reality of this strategy’s collapse has not, I believe, fully sunk in with some observers. Thus, some commentators warning President-elect Barack Obama against bold action have held up Bill Clinton’s political failures in his first two years as a cautionary tale.

But America in 1993 was a very different country - not just a country that had yet to see what happens when conservatives control all three branches of government, but also a country in which Democratic control of Congress depended on the votes of Southern conservatives. Today, Republicans have taken away almost all those Southern votes - and lost the rest of the country. It was a grand ride for a while, but in the end the Southern strategy led the G.O.P. into a cul-de-sac.

Mr. Obama therefore has room to be bold. If Republicans try a 1993-style strategy of attacking him for promoting big government, they’ll learn two things: not only has the financial crisis discredited their economic theories, the racial subtext of anti-government rhetoric doesn’t play the way it used to.

Will the Republicans eventually stage a comeback? Yes, of course. But barring some huge missteps by Mr. Obama, that will not happen until they stop whining and look at what really went wrong. And when they do, they will discover that they need to get in touch with the real “real America,” a country that is more diverse, more tolerant, and more demanding of effective government than is dreamt of in their political philosophy. ++

Do We Understand How Big The Economic Recovery Plan Is?
Bill Scher, OurFuture
December 29th, 2008

We are on the verge of nothing less than a transformation in the role of our federal government, from one of conservative neglect to one of progressive action.

Conservatives, deeply fearful of being buried on the wrong side of history, are gearing up to obstruct progress wherever possible.

Yet it seems to me that the liberal progressive grassroots are not similarly geared up to deflect conservative attacks and maximize chances of success.

Earlier this month, the Institute for America’s Future proposed a Main Street Recovery Program of $900 billion in “substantial, strategic, and sustained” investment over two years in infrastructure, clean energy, broadband, health care and education.

Such public investment would not only blunt the impact of recession in the short-term, but strengthen America’s global competitiveness in the long-run, firmly putting us on the path toward energy sustainability, quality education and health care for all. (IAF’s Robert Borosage and Eric Lotke recently published “A New New Deal? in the latest edition of The Nation, making the case for the plan.)

A coalition of more than 200 economists, labor leaders and progressive organization leaders endorsed the plan, declaring $900 billion over two years, “should define the floor, not the ceiling, of what needs to be done.”

The Obama-Biden transition team is discussing something similar in terms of what areas of neglect public investment should target, but has yet to commit to a package of quite that size. Incoming White House senior adviser David Axelrod said yesterday on CBS’ Face The Nation:

We’ve talked about a package from $675 billion to $775 billion. But you know, those numbers are not fixed.

One thing we–I think everyone agrees on, economists from left to right, is that we have to do something very large.

Larry Summers wrote an op-ed in The Washington Post today, in which he said that economists believe that if we don’t do something large that we’re going to be looking at double-digit employment–unemployment by the end of next year, and that is totally unacceptable. So we want to create three million–or create or save three million jobs to forestall that.

And we want to do it in a way that leaves a lasting footprint, by investing in energy and health care projects and refurbishing the nation’s classrooms and labs and libraries so our kids can compete, and rebuilding our crumbling roads and bridges and waterways.

And in this way we’re not only just–we’re not only creating work. But we’re laying the foundation for the future of economy.

Following Axelrod, Nobel award-winning economist Paul Krugman expressed concern that, as big as $775 billion is, it may not be big enough:

I’d like to see it bigger. I understand that there’s difficulty in actually spending that much money, and they’re also afraid of the T-word. They’re afraid of a trillion dollar[s] for the two-year number.

But you know, the back of my envelope says it takes roughly $200 billion a year to cut the unemployment rate by 1 percent from what it would otherwise be. In the absence of this program, we could very easily be looking at a 10 percent unemployment rate.

So you do the math and you say, you know, even these enormous numbers we’re hearing about are probably enough to mitigate but by no means to reverse the slump we’re heading into.

So … they’re thinking about it straight. I liked what Larry Summers wrote in The Washington Post. I think he was getting it right that the risks of being too small are much bigger than the risks of being too big.

Nonetheless, I am actually concerned that this thing is not going to be really big enough.

At the same time, the Obama-Biden transition is showing some concern that conservative obstructionists will be able to delay any enactment of an economic recovery plan, even though everyone agrees that urgent action is needed if our government is to successfully mitigate the damage from the recession.

Already, conservatives are flailing about trying to come up with talking points to justify obstruction, finding a sliver of projects that look like wasteful pork to stoke skepticism about the overall package. Traditional media outlets have begun carrying water for conservatives, relaying knee-jerk criticisms without bothering to investigate the merits of those projects or putting their tiny size in the broader context.

Between today and the Jan. 20th inauguration is a critical period, where a concerted push from the liberal progressive grassroots can generate healthy pressure on President-Elect Obama and congressional leaders to treat $900 billion as the minimum number for any package, and put heat on Senate Republicans to think twice about obstructing action in a time of crisis.

If the package is too small and too slow to be effective in limiting the pain from the recession, we may miss this once-in-a-generation opportunity to transform our government from one defined by callous and reckless conservatism to one that exemplifies responsible and responsive liberalism.

However, in my casual political conversations with liberal friends and family over the last few days, I don’t see a focus on quickly enacting a successful economic package.

I see understandable criticism about certain Obama cabinet picks and Rev. Rick Warren. I hear chatter about Gov. Blagojevich. But I feel little energy towards what will literally be the Number One legislative priority for our next government. And with conservatives beginning to regroup, that’s a potentially dangerous dynamic.

For progressive ideals to be successful in remedying the damage left by conservatism, we in the grassroots need to be able to walk and chew gum, push against Obama and pull for Obama when appropriate.

If we assume that Obama never needs any help, and we spend all of our time finding things to criticize, we will not play a positive influential role. Good ideas will get watered down as all outside pressure will be coming from the Right, and constructive criticism from the Left of bad ideas will get unfairly dismissed as coming from an unreasonable peanut gallery.

Now is a time to help. Speak up. Comment on Change.gov. Contact your congressperson and Senator. Write your local newspaper. Call-in your favorite talk radio show. Set a high bar for action. Debunk conservative misinformation. Let Washington know you’re paying attention.

On economic recovery, the stakes are enormous, and we cede the debate at our peril. ++

FDR Prolonged the Depression? Really?
David Sirota, TruthDig
Jan 1, 2009

If you’re like me, you sometimes find yourself speechless when confronted with abject insanity.

If you’re like me, for instance, you were dumbfounded when “Forrest Gump” beat out “Pulp Fiction” for best picture; when HBO’s “Sopranos” received more accolades than “The Wire”; and when George W. Bush insisted Iraqi airplanes were about to drop WMDs on American cities.

So if you’re like me, you probably understand why I was momentarily tongue-tied last week after running face-first into conservatives’ newest (and most ridiculous) talking point—the one designed to stop Congress from passing an economic stimulus package.

During a Christmas Eve appearance on Fox News, I pointed out that most mainstream economists believe the government must boost the economy with deficit spending. That’s when conservative pundit Monica Crowley said we should instead limit such spending because President Franklin Roosevelt’s “massive government intervention actually prolonged the Great Depression.” Fox News anchor Gregg Jarrett eagerly concurred, saying “historians pretty much agree on that.”

Of course, I had recently heard snippets of this silly argument—right-wing pundits are repeating it everywhere these days. But I had never heard it articulated in such preposterous terms, so my initial reaction was paralysis—the mouth-agape, deer-in-the-headlights kind. Only after collecting myself did I say that such assertions about the New Deal were absurd. But then I was laughed at—as if it was hilarious to say that the New Deal did anything but exacerbate the Depression.

Afterward, suffering pangs of self-doubt, I wondered whether I and most of the country are the crazy ones. Sure, the vast majority of Americans think the New Deal worked well. But are conservatives right? Did the New Deal’s “massive government intervention prolong the Great Depression”?

Ummm … no.

Upon deeper examination, I discovered that the right bases its New Deal revisionism on the short-lived recession in a year straddling 1937 and 1938. But that was four years into Roosevelt’s term—four years marked by spectacular economic growth. Additionally, the fleeting decline happened not because of the New Deal’s spending programs, but because Roosevelt momentarily listened to conservatives and backed off them. As Nobel-winning economist Paul Krugman notes, in 1937-38, FDR “was persuaded to balance the budget” and “cut spending and the economy went back down again.”

To be sure, you can credibly argue that the New Deal had its share of problems. But overall, the numbers prove it helped—rather than hurt—the macroeconomy. “Excepting 1937-1938, unemployment fell each year of Roosevelt’s first two terms [while] the U.S. economy grew at average annual growth rates of 9 percent to 10 percent,” writes University of California historian Eric Rauchway.

What about the New Deal’s most “massive government intervention”—its financial regulations? Did they prolong the Great Depression in ways the official data didn’t detect?

Nope.

According to Federal Reserve Chairman Ben Bernanke, “Only with the New Deal’s rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression.” In fact, even famed conservative economist Milton Friedman admitted that the New Deal’s Federal Deposit Insurance Corp. was “the structural change most conducive to monetary stability since … the Civil War.”

OK—if the verifiable evidence proves the New Deal did not prolong the Depression, what about historians—do they “pretty much agree” on the opposite?

Again, no.

As Newsweek’s Daniel Gross reports, “One would be very hard-pressed to find a serious professional historian who believes that the New Deal prolonged the Depression.”

But that’s the critical point I somehow forgot last week—the truism we must all remember in 2009: As conservatives try to obstruct a new New Deal, they’re not making any arguments that are remotely serious. ++

The Anti-Stimulus Crowd: The Fear of Success
Dean Baker, t r u t h o u t | Perspective
Monday 05 January 2009

At least some Republicans are starting to muster an anti-stimulus drive, claiming that President-elect Obama’s package will not help the economy. Their drive is centered on what they claim is a careful rereading of the history of the New Deal. According to their account, President Roosevelt’s policies actually lengthened the Great Depression.

In their story, we would have been better off if we just left the market to adjust by itself. New Deal programs that directly employed people, or in other ways supported living standards, created an uncertain investment climate. They claim that this uncertainty slowed the process of market adjustment that was necessary for returning to high levels of employment.

The Wagner Act, which created the legal framework for the union organizing drives of the era, stands out as being especially pernicious in their story. The Fair Labor Standards Act, which created the 40-hour workweek and established the first national minimum wage, also gets singled out for criticism. In this new reading of history, what most people consider the great successes of the New Deal simply worsened the Great Depression.

In reality, any careful reading showed that the New Deal policies substantially ameliorated the effects of the Great Depression for tens of millions of people. The major economic failing of the New Deal was that President Roosevelt was not prepared to push the policies as far as necessary to fully lift the economy out of the Great Depression.

Roosevelt was too worried about the whining of the anti-stimulus crowd that he confronted. He remained concerned about balancing the budget when the proper goal of fiscal policy should have been large deficits to stimulate the economy. Roosevelt’s policies substantially reduced the unemployment rate from the 25 percent peak when he first took office, but they did not get the unemployment rate back into single digits.

It took the enormous public spending associated with World War II to fully lift the economy out of the depression. The lesson that economists take away from this experience is that we should be prepared to run very large deficits in order to give the economy a sufficient boost to generate self-sustaining growth.

However, from the standpoint of Republicans, the more ominous lesson of the New Deal policies is that it left the Democrats firmly in power for more than 20 years. The Republicans did not regain the White House until 1952, 20 years after President Roosevelt was first elected.

Imagine how terrifying the prospect of 20 years of Democratic presidencies must be for the current generation of Republican leaders. This would mean that they would not retake the White House until 2028, just 20 years before the Social Security trust fund is first projected to face a shortfall.

In 2028, Newt Gingrich will be 85 years old; Mitt Romney will be 81; Mike Huckabee will be 73 and Senator McCain will be 98. Even Sarah Palin will be a less than youthful 64. In short, if President-elect Obama is allowed to carry through with his stimulus package and the rest of his ambitious domestic agenda, most of current leadership of the Republican Party can expect to spend the rest of their political career in the political wilderness, far removed from the centers of power.

For this reason, the Republicans can be expected to adopt a strategy aimed at delaying and diluting the stimulus. We can expect their leaders to find every conceivable argument to slow down the spending that the economy desperately needs right now to prevent further job loss. While some of their concerns may be legitimate - we should all support efforts to restrain wasteful pork barrel spending and rein in corruption - these concerns should not be the basis for obstructing stimulus. The public should be careful to distinguish legitimate concerns from simple delaying tactics.

In short, we should realize that the main concern of some of those opposed to stimulus may not be that it will fail, but rather that it will succeed. Most of us don’t have the same set of concerns. ++

NEW YEAR’S REVOLUTIONS
There’s Plenty of Money Around. Let’s Take It.
Ted Rall
Thu Jan 1

NEW YORK–What’s the difference between you and a corpse? You both contain the same organs, the same fluids–all the same stuff. Inside you, stuff moves around. That’s the difference between life and death.

What’s the difference between economic boom and bust? Again: movement. The United States of America is just as rich today as it was a year or, for that matter, ten years ago. It still possesses the same rich natural resources, the same enviable geography, and the same productive, innovative and energetic workforce. Our country still has enormous intrinsic value. But money, the lifeblood of any economy, has stopped moving around.

Wealth is still here. But the economy has flat-lined.

We know what caused the problem–the double bursting of the dot-com and housing bubbles, coupled with government regulators who took the last three decades off from work and financial analysts who said the old rules no longer applied. (The old rules always apply.) The underlying meta causes of the Crash of ‘08 were an unholy trinity of stagnating wages, easy credit and brilliantly executed consumer propaganda that convinced people they were lame unless they bought all the latest stuff. But that’s a discussion for another time. This week, let’s think about how to escape the deflationary spiral that will reduce the world’s richest nation to penury unless something is done soon.

The Fed, having reduced interest rates to zero, is out of ammo. Banks are using the $700 billion bailout to buy each other up, enriching only themselves and a few hundred investment bankers. (In all fairness, Treasury Secretary Henry Paulson told them to do just that.)

President-Elect Obama’s plan blends George W. Bush and FDR’s greatest hits: a symbolic Bush-style tax cut of $500 per person ($1,000 per couple) and a $850 billion infrastructure construction bonanza reminiscent of the WPA projects of the 1930s. Obama’s tax cut won’t stimulate the economy; they never do. Due to the “multiplier effect,” Obama’s economists predict that his public works projects will create 3.2 million new jobs by the first quarter of 2011. “Peter Morici, economist at the University of Maryland, projects that $100 spent on a bridge or school boosts economic activity by about $200,” reports the Associated Press. (That doesn’t count the benefit of improving Americans’ longer-term productivity. For instance, better roads could reduce commuting times or help get goods to customers more efficiently.)”

A public works program is a good idea. But Obama’s plan won’t be enough to put a dent in the skyrocketing unemployment rate. 3.2 million jobs would be barely enough to replace six months worth of job losses at current rates. And most analysts think those rates will rise. With the federal budget continuing to sink $9 billion a month into the fiscal sinkhole of Iraq, there isn’t much cash to make the plan bigger.

“With negative or low economic growth projected well into the future, the economy needs a long-term fix,” says Stanford economist John Taylor, who worked in Bush’s Treasury Department. Definitely. But what?

Unless something big happens (like every pundit, I should predicate every prognostication with the acronym USH for “unless something happens”), the depression will deepen quickly. Our economy is two-thirds dependent on consumer spending, but consumers are stone cold broke. Decades of attacks on labor and free trade agreements caused wages to stagnate as inflation raged, so Americans have no savings to draw upon. Credit is no longer available as a back-up.
The American consumer has left the building.

Demand will keep shrinking, forcing companies to lay more people off, which will accelerate the shrinkage of their customer bases. Prices will drop to chase the few dollars left in the economy, triggering deflation. It’s already begun: Prices fell 1.7 percent in November (20 percent on an annualized basis). Debtors will try to pay off inflated credit card bills and mortgages with deflated money. They will fail. Misery will spread.

What happens next, I think, is that people will do what large numbers of people always do when they need money and food but can’t find a job. They will start to think about the rich, who still have all the wealth they accumulated while money was still circulating. And they will take it from them. It might be the easy way, through liberal-style income redistribution. Or it might be the hard way. Either way, it goes against the laws of nature to expect starving people to allow a few individuals to sit on vast aggregations of wealth.

When I was young, I assumed that revolutions resulted from ideology, because idealists wanted a fairer world. Now, as we stare down the barrel of economic apocalypse, I realize that they’re carried out by desperate people who have nothing to lose, in Marx’s words, and everything to gain. They take stuff from the rich and write the ideological tracts after the fact.

With the economic distress we’re likely to see in the coming year or two or three, revolution will become increasingly likely unless money starts coursing through the nation’s economic veins, and soon. Will it be a soft revolution of government-mandated wealth distribution through radical changes in the tax structure and the construction of a European-style safety net, as master reformer FDR presided over when he saved capitalism from itself? Or will the coming revolution be something harder and bloodier, like the socioeconomic collapse that destroyed Russia after the fall of the Soviet Union? To a great extent, what happens next will depend on how Barack Obama proceeds in his first weeks as president. ++

“So keep fightin’ for freedom and justice, beloveds, but don’t you forget to have fun doin’ it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin’ ass and celebratin’ the sheer joy of a good fight, be sure to tell those who come after how much fun it was.”
~ Molly Ivins, 1944 - 2007

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Entry Filed under: Political Waves