The Solution to the 'New Normal' Economy

So how do we fix the American Economy?  Good question.  Based on all the reading I was doing, I wrote the following on March 14, 2009, which still seems to me to be the way to go (and Obama is beginning to move in this direction, aleit with great opposition from the Republicans):

....what does Obama need to do to fix the economy? Basically, reverse the basic characteristics of Reaganism and thus return to a sound mixed economy that might have a chance to rebalance and restore its equilibrium and health, with steady, sustainable growth, whose benefits are widely distributed throughout society.

Specifically:

1. Reverse the Bush tax cuts so that the rich begin paying their fair share of the public needs. Reduce the ratio between the top-paid executives and the lowest paid employees from its current 400-500 to one, down to a more reasonable level.

2. Reregulate the financial sector, the banks and the 'shadow banking system' in such a way as to reduce its power and influence, and reduce its risky behavior. This includes predatory lenders and credit-card companies, who prey upon average people. Encourage savings, and discourage excessive indebtedness at every level.

3. Encourage and protect the working man and his fair share of the economic pie, thus building up the middle and lower classes, and reducing poverty.

4. Somehow stop the deindustrialization of America, so that good jobs are once again available for average people.

5. Prevent economic bubbles from forming, through appropriate Federal Reserve and Treasury policies, and thus the consequent damaging busts from happening.

6. Get control of health care costs while spreading the coverage of health care.

7. Reduce our dependence upon foreign oil and increase our use of clean energy.

8. Move the country toward more sustainable living arrangements that are less dependent on automobiles. Go back to a functioning passenger train system that used to exist.

9. Put the federal government on a budgetary diet, including the military. Get entitlements under control.

Why We're In the 'New Normal' (ie. Permanently Depressed) Economy

Recently, there's been a lot of talk in the media of the 'new normal' in the economy, where there is a recovery going on, but then again, there isn't.  The stock market has recovered, along with the banker's bonuses, etc., but unemployment, job growth, income growth throughout the American economy are all still very bad.  It's like this is a new discovery, but really, this is what I've expected all along.

Here's what I wrote last November, 2009:

On the way into the office this morning, the NPR news break announcer proclaimed the recession over. Happy days are here again, or to arrive shortly!

Oh really?

Mainstream economists and the media are really pathetic. They are living in a dream world of wishful thinking and wide-eyed optimism, totally divorced from reality.

The only people I know of for whom the recession is over are the Goldman Sachs bankers receiving their bonuses for Christmas.

Of course, even the optimists don't really mean we're on the path to recovery, they just mean the economy has bottomed out. Which may or may not be true, given all the uncertainties still looming. But we are by no means starting to recover. If anything, we're just digging ourselves deeper in a hole, having replaced private debt with public debt.

And the worst of it is, nobody is leveling with the people about our true condition. It's too politically unpalatable. The truth is too unpleasant.

Or perhaps they've just deceived themselves. Denial is one of our biggest vices here in the USA.

And then, 18 months ago, on April 13, 2009, I tried to explain why I saw a 'new normal' coming:

We are now in the throes of 'revisioning' our economy. What it has been is not what it will be.

First, some historical perspective on the 20th Century experience of 'Americana Economus.' We became a great power in the late 19th century, based on our abundant natural resources, the rise of our industrial base, and a vibrant capitalist economic system. After World War II, we were the dominant world superpower, economically and militarily. And with the New Deal reforms in place, wealth flowed to the average person in astounding ways, to the point where we truly became the most affluent nation the world has ever known.

That era basically ended in the early 70s, with the first oil embargo and the rise of stagflation. Our domestic oil had run out. Add to that the rising global economic competition of, first, nations like Germany and Japan, and then China and India, and you have an American economy in relative decline. We went from being the largest creditor nation to the largest debtor nation. With the beginning of the Reagan era in 1981, our affluence continued declining, although now the decline was masked by inflation, rising debt levels, easy money from the Fed, two-income households, various economic bubbles (dot-com and housing), Wall Street innovations such as CDO securitization and derivatives, and technological developments like computers, the internet, and DVDs.

The masking of our three-decade-long economic decline ended with the financial and economic collapse of the last two years. Now we find ourselves in a difficult situation, which will not be easy to get out of. And to some extent, I agree with [Robert] Samuelson that the Obama team doesn't seem to have come to grips with our dilemma. Many critics are saying that the Obama people think we can return to the status quo ante of prosperity that we knew prior to 2007. I don't think we can.

Fear of the Future

Joe Klein is beginning to glimpse a sense of fear among the electorate, that our bad economic times are not going to be easily overcome:

And that is the great American fear right now. It has been the underlying theme of almost every interview I've conducted during this monthlong road trip. Republicans are more confident in their answers — less government, lower taxes. Those are perennial positions with great appeal. But most people I've talked with are convinced that this is an unprecedented crisis, a slow slide from dominance and prosperity, that demands a new and dramatic approach. Neither Brown nor Whitman offered any striking solutions, but they're not alone; I haven't met a single candidate along the way who has broken through the miasma with something that sounds fresh and plausible. The best, like Brown, convey a restless energy, a love of the game and fearlessness in the face of a monumental challenge. But this year, for this crisis, that clearly isn't enough.

My guess is that Whitman will win, as the outsider newbee, though it will likely be a close race. I say, Whitman 52%, Brown 48%. Who has the better ideas for this California crisis, I really don't know. I think they would both bring some assets to the position. Brown would bring his personal asceticism and independence to the job, Whitman would bring probably more youthful energy and innovation from the world of business, as well as the fact that she's a self-made woman, an real political asset in a state like California.

On the other hand, what Klein is hearing is absolutely correct: this is an unprecedented national crisis, something we haven't experienced before. There is a new economic 'normal' setting in, with very high unemployment, a loss of confidence and therefore hope, public governments at every level coping with massive deficits and therefore the need to cut back spending (or raise taxes, if that's even possible). This kind of economic environment is a perfect growth culture for radicalism and anti-establishmentarianism of all kinds (of which the Tea Party is a perfect example). It's impossible to predict where this is going to go.

The Power (Or Not) of Money

I thought this was a very interesting graph from Time Magazine about personal spending in political campaigns:

The huge disparity between Meg Whitman and Jerry Brown is amazing, yet Brown is still in the lead, if I'm not mistaken.  It goes to show that money isn't everything (who said that?).

America's Goal: Dominate the World

William Blum, author of Killing Hope, writes about the American foreign policy that has been, is, and, most likely, will be.  His is a radical, unconventional, but possibly very true, critique of America:

In one of his regular "Reflections" essays, Fidel Castro recently discussed United States hostility towards Venezuela. "What they really want is Venezuela's oil," wrote the Cuban leader. This is a commonly-held viewpoint within the international left. The point is put forth, for example, in Oliver Stone's recent film "South of the Border". I must, however, take exception.

In the post-World War Two period, in Latin America alone, the US has had a similar hostile policy toward progressive governments and movements in Guatemala, Salvador, Nicaragua, Honduras, Grenada, Dominican Republic, Chile, Brazil, Argentina, Cuba, and Bolivia. What these governments and movements all had in common was that they were/are leftist; nothing to do with oil. For more than half a century Washington has been trying to block the rise of any government in Latin America that threatens to offer a viable alternative to the capitalist model. Venezuela of course fits perfectly into that scenario; oil or no oil.

This ideology was the essence of the Cold War all over the world.

The secret to understanding US foreign policy is that there is no secret. Principally, one must come to the realization that the United States strives to dominate the world. Once one understands that, much of the apparent confusion, contradiction, and ambiguity surrounding Washington's policies fades away. To express this striving for dominance numerically, one can consider that since the end of World War Two the United States has:

--Endeavored to overthrow more than 50 foreign governments, most of which were democratically-elected.

--Grossly interfered in democratic elections in at least 30 countries.
Waged war/military action, either directly or in conjunction with a proxy army, in some 30 countries.

--Attempted to assassinate more than 50 foreign leaders.

--Dropped bombs on the people of some 30 countries.

--Suppressed dozens of populist/nationalist movements in every corner of the world.

The United States institutional war machine has long been, and remains, on automatic pilot.

So What Good Is The CIA?

Ray McGovern writes about the failure of the Obama Administration to seek a National Intelligence Estimate (NIE) about the Afghanistan decision:

My experience in providing intelligence support to administrations from John Kennedy to George H. W. Bush was that NSC “procedure and protocol” in addressing key foreign policy decisions almost always included a request for intelligence support in the form of a National Intelligence Estimate. And yet, retired Marine general Jones deferred to active duty four-stars Mullen, Petraeus, and McChrystal. This time—no need for an NIE, thank you very much.

At his confirmation hearings, CIA chief Leon Panetta, a 16-year veteran in the House of Representatives, told the Senate Intelligence Committee that he “would always be a creature of Congress.” That is the kiss of death; no one with that mindset should be director of any intelligence organization.

Woodward writes that Panetta never volunteered his opinion to the President and that Obama never asked for it. Remarkable. Jones should have insisted on getting an “opinion” from the lawyer Obama appointed to head the CIA, but didn’t. Neither did Congress.

Not that Panetta lacked an opinion. I don’t mean an unexpressed intelligence opinion on the projected effects of this or that course of action in Afghanistan. Panetta’s opinion, Woodward writes, pertained to the fact that “Obama was facing a huge political reality.”

From the point of view of an intelligence professional, retired with no stars, the following may just be the most damning two sentences in Woodward’s book. The author says that Panetta told other principal advisers:

“No Democratic president can go against military advice, especially if he asked for it … So just do it. Do what they say.”

(Harry Truman, who created the CIA not to conduct assassinations or fire missiles from drones but rather to give the president, without fear or favor, unadulterated intelligence on developments abroad, must be rolling over in his grave.)

Small wonder that retired four-star admiral Dennis Blair, as Director of National Intelligence nominally Panetta’s boss, called the Afghanistan review process “the goddamndest thing I’ve ever seen.”

(Ray McGovern works with Tell the Word, a publishing arm of the ecumenical Church of the Saviour in inner-city Washington. He served as an Army infantry/intelligence officer in the early Sixties and for the next 27 years as an analyst at CIA, where he chaired NIEs and prepared and briefed the President’s Daily Brief. He is co-founder of Veteran Intelligence Professionals for Sanity.)

Afghanistan: Eikenberry and Biden vs. Everyone Else

Ray McGovern, former spy and now CIA critic, writes that Ambassador Eikenberry (along with Joe Biden) is about the only person in the Administration to come out looking good on the Afghanistan issue:

Before retiring from the Army, Lt. Gen. Eikenberry had done two tours in the thick of things there. During 2002-2003 he had the unenviable task of trying to rebuild the Afghan National Army and police forces. He then served 18 months (2005-2007) as commander of all U.S. forces in Afghanistan.

In a cable from Kabul on November 9, 2009, Eikenberry took strong issue with “a proposed counterinsurgency strategy that relies on a large, all-or-nothing increase in U.S. troops.” He noted that there were “unaddressed variables” in the Pentagon plan for further escalation, like “Pakistan sanctuaries and weak Afghan leadership,” that could “block us from achieving our strategic goals, regardless of the number of additional troops we may send.” Eikenberry specifically warned that there could be “no way to extricate ourselves.”

He insisted on the need to bring “all the real-world variables to bear in testing the proposed counterinsurgency plan.” Confident that an honest intelligence estimate would issue similar cautions, he pleaded for a “comprehensive, interdisciplinary analysis of all our strategic options.”

Eikenberry could hardly have been more blunt in warning against a premature decision for a troop increase, arguing, “there is no option but to widen the scope of our analysis and to consider alternatives beyond a strictly military counterinsurgency effort within Afghanistan.”

According to Woodward, Gen. David Petraeus dismissed Eikenberry’s proposal as “laughably late in the game.” Though the ambassador had “reasonable concerns,” Petraeus felt they had all been asked and answered.

Eikenberry had already incurred the wrath of Joint Chiefs Chairman Adm. Mike Mullen in a cable of November 6, in which he wrote, “ I cannot support [the Defense Department’s] recommendation for an immediate Presidential decision to deploy another 40,000 here.” Eikenberry went on to adduce six game-changing facts. Taking into account any one of them, much less all combined, showed such escalation to be a fool’s errand.

Mullen reportedly reacted very strongly, saying, “This is a betrayal of our system.” In Mullen’s world, if you dare cross what the top brass has already decided, you are a betrayer! No comment could point up better the pitfalls of ceding determining roles in strategic decision making to four-stars officers with died-in-the-wool notions of the requirements of military discipline—even in what should have been free brainstorming of possible alternative courses.

O'Reilly KO's Maher on Religion

I'm not normally a Bill O'Reilly fan, but in this short debate video with Bill Maher about religion, O'Reilly comes across as the thoughtful, moderate, even liberal Christian, whereas Maher sounds extreme and absolutistic.  I happen to think that Maher is right about a lot of things (as well as funny) but this round goes to O'Reilly.

Dumber Than Dumb

Charles Blow (can you imagine having that name?) of the NYT writes about our dumb electorate:

Big-city liberals and their blogging buddies love to paint Tea Partiers as yokels with incoherent candidates and language-mauling signs. (Some have even dubbed their misspellings and grammatical gaffes “Teabonics.”) On some level, this may be true. But there is also a certain hypocrisy to these taunts.

The unpleasant fact that these liberals rarely mention, and may not know, is that large swaths of the Democratic base, groups they need to vote in droves next month — blacks, Hispanics and young people — are far less civically literate than their conservative counterparts.

Therein lies the hurdle for the Democrats: How can they excite this part of the base that is not engaged and knowledgeable in an off-year election? How can they motivate these voters to help Democrats maintain their Congressional majorities when, according to a poll released this week by the Pew Research Center, 42 percent of blacks, 42 percent of Hispanics and 35 percent of voters ages 18 to 29 years old don’t even know that Democrats have a majority in the House? It’s sad. Pathetic, really. But it’s a political reality. (Only 71 percent of Democrats overall knew that Democrats had a majority in the House. By comparison, 82 percent of Republicans knew it.)

Vice President Joe Biden said at a fund-raiser on Monday that the Democratic base should “stop whining.” The “professional left” may be whining, but underengaged Democrats are simply wandering. And, by the way, many Democrats don’t even know who the vice president is. In the Pew poll, 64 percent of Hispanics, 51 percent of young adults and 45 percent of blacks could not name Biden as the vice president. (Only 35 percent of Republicans got it wrong.)

In a Rolling Stone interview this week, President Obama both described himself as a progressive and then laid into progressives for their “debilitating” mind-sets. Whom are you talking to, Mr. President? According to a Gallup poll released in July, most Democrats didn’t even seem to know what a progressive was, and of those who did, slightly more said that it didn’t describe them than said that it did.

This high-altitude bickering is a waste of time. You can’t fight in the clouds if you want to win on the ground.

The smarter tactic is to build excitement rather than sow discord. For example, Obama has made a concerted effort recently to reach out to young people, and that appears to be paying off.

Excitement is exhilarating and contagious, even if you’re not aware of all the policies and players. Just ask those Tea Party yokels.

Brook's New Republican

NYT's David Brooks talks about his favorite kind of Republicans:

But (Meg) Whitman is representative of an emerging Republican type — what you might call the austerity caucus. Flamboyant performers like Sarah Palin get all the attention, but the governing soul of the party is to be found in statehouses where a loose confederation of über-wonks have become militant budget balancers. Just as welfare reformers of the 1990s presaged compassionate conservatism, so the austerity brigades presage the national party’s next chapter.

Mitch Daniels, the governor of Indiana who I think is most likely to win the G.O.P. presidential nomination in 2012, is the spiritual leader. Gov. Chris Christie of New Jersey is the rising star. Jeb Bush is the eminence. Gov. Bobby Jindal of Louisiana and Rob Portman, a Senate candidate in Ohio, also fit the mold.

These are people who can happily spend hours in the budget weeds looking for efficiencies. They’re being assisted by budget experts from the Hoover Institution, the Manhattan Institute and freelancers like Bob Grady, who did budgeting in George H.W. Bush’s administration. Members of the caucus have a similar sense of the role history has assigned them. “This state had a party for 10 years and I’m the guy who got called in to clean up the mess,” Christie says....

But Whitman has the personality type that you’re seeing more and more of these days. Not big picture, like Reagan. Not an idea volcano, like Gingrich. Not a straightforward man of faith, like George W. Bush. The quintessential New Republican is detail-oriented, managerial, tough-minded, effective but a little dry. If Whitman wins her race, she’ll fit right in.