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The following puts together a bunch of stuff I’ve been posting over the past few months… it’s time to start thinking about these ideas in terms of new economic models to replace the old, worn out ones…

The trickle-down, deregulatory agenda — what I have called YOYO, or “you’re on your own” economics — presumes that the growth chain starts at the top of the wealth scale and “trickles down” to those at the middle and the bottom of that scale. Problem is, that hasn’t worked.

Here’s a better model. In the midst of the 1990s boom, which lifted the earnings and incomes of middle and low-wage workers much more so than the 1980s or 2000s cycles, Larry Mishel and I started talking about “wage-led demand growth.” We meant that a much better way to generate robust, lasting, and broadly shared growth is through an economically strengthened middle class.

At the most basic level, this growth model is a function of customers interacting with employers, business owners, and producers. A recent article by successful venture capitalist Nick Hanauer very compellingly describes this interaction:

I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be. (more…)

The reason members of the Super Committee didn’t reach an agreement is that Republican members insisted on damaging cuts to Social Security, Medicare, and Medicare — and they wouldn’t budge from their refusal to lower tax rates for the richest 1% of Americans.

If the so-called “Super Committee” had made a bi-partisan deal based on the announced negotiating positions of the Republicans and Democrats on that panel, the result would have been higher unemployment, serious damage to the social safety net — and worsening deficits.

Super Committee Democrats, concerned about being seen as blocking a deal, clearly offered Social Security and Medicare benefit cuts in return for a pitifully small increase in taxes and large and damaging spending cuts in the middle of a struggling economy.

The deal on the table — whose failure is much lamented by beltway pundits — would have seriously harmed the economy, without significantly reducing deficits. In fact, it might have made it worse.

Luckily, the progressive base — and the Democratic Caucus in the House and Senate — convinced those negotiators that a bad deal is worse than no deal.

Democrats should have been guided by the message of the September 6th press conference at which Super Committee appointee Rep. Chris Van Holland, standing with former Speaker Nancy Pelosi, declared “Job growth will contribute to deficit reduction,” according to the Washington Post coverage:

Van Hollen, who made the remarks at a news conference with House Minority Leader Nancy Pelosi (D-Calif.), Minority Whip Steny Hoyer (D-Md.) and other members of the Democratic leadership, argued that the most recent Congressional Budget Office report states that for every 1/10 of one percentage point increase in the U.S. gross domestic product, the deficit is reduced by $310 billion.
“Now, they project over the next 10 years that average GDP, average growth of the economy will be about 2.9 percent,” he said. “What those numbers tell you is that if you got that growth rate up by half of one percent, you would actually reduce the deficit by $1.5 trillion, which is the target laid out in the legislation before us.”

Clearly, this is what all progressives believe: the weak economy should not be allowed to fall backward into another recession — which could happen if we cut spending too fast or too deeply. And action to get the economy growing robustly would be the most effective thing we could do to bring down the Federal deficit. (more…)

By Richard (RJ) Eskow
Senior Fellow, Campaign for America’s Future

Scientists say there are trillions of parallel universes. Statistically, that means that must be one where some poor version of humanity lives in an inverted, mind-bending alternate reality where everything is backwards and nothing makes sense.

But why did it have to be us?

Consider the latest evidence: 64 Senators are ignoring the one problem that polls consistently show is the public’s highest priority. Instead they’ve written a letter to the President asking him to make a different issue his highest priority – and to address it by doing something the public doesn’t want. In return they’re promising that they’ll do something the public doesn’t want, too.

Welcome to reality.

You can see the original letter here. Then you can keep reading to see what that letter would say in a rational universe. (more…)

By Robert Creamer
Political organizer, strategist and author

For over forty years, the right wing has mounted an irrepressible campaign to discredit the very concept of government in the United States.

It continued its campaign to demonize government even as we watched first responders –government employees — run into the collapsing twin towers to rescue their fellow citizens on September 11, 2001. They continued to defame the concept of government in the face of daily reports of the bravery and sacrifice of our soldiers in Iraq and Afghanistan — all representing the Government of the United States of America.

The Right even continued this drum beat in the face of the most spectacular recent failure of its anti-public sector philosophy — the 2008 financial collapse. They simply ignored what was obvious to the entire world: that today’s economic crisis was caused by the fact that Republicans had essentially ended effective public sector oversight of the big Wall Street Banks whose greed and recklessness caused the worst economic crisis in 60 years and cost eight million Americans their jobs.

In the Republican moral universe, the private sector is good, and the public sector is evil — it’s as simple as that.

This week, the new House Republican Majority rode into Washington, DC to promote an anti-public sector agenda that is overtly aimed at shrinking the “evil” Federal government.

Progressives can no longer allow the radical right to define the concept of Government in the United States. It’s time to proudly and forcefully stand up for the public sector. (more…)

By Robert L. Borosage
Co-Director Campaign for America’s Future

Americans have grown fearful. Most believe, not surprisingly, that the country is headed in the wrong direction. For the first time ever, most Americans believe their children may not fare as well as they have. We spend nearly as much as the rest of the world combined on our military, chasing phantoms across the world. Conservatives in both parties rail about debt and deficits. They line up to support adding another $33 billion in emergency spending for the misbegotten war in Afghanistan, while blocking the $23 billion needed to forestall the layoff of a staggering 275,000 teachers across the country.

Washington is crazed about debt and deficits, but the real deficit is in fortitude, not finances. Consider the contrast between this country emerging from the Great Depression and World War II and now.

Then our debt was a far greater burden than now — over 120% of GDP. The country had suffered a decade long Great Depression and a global war. The troops were coming home, but the entire economy was mobilized for war. Europe and Japan were devastated. And America was led by Harry S. Truman, a former haberdasher, product of the corrupt Pendergast machine in Kansas City.

But, having won the War, America had the confidence to face its future. Despite the massive debt, Congress passed the GI Bill, educating a generation of veterans. We financed the transformation of military factories to civilian production, investing in the industries — from aerospace to automobiles — that would transform the country. Congress passed subsidies to aid the purchase of homes, stimulating the growth of the suburbs. We passed the Marshall Plan to spur the rebuilding of Europe. A Republican President, Dwight D. Eisenhower, a hero of the war, put a lid on military spending, while building the interstate highway system.

With rare exceptions the country continued to run annual deficits and the accumulated debt continued to rise. But the country grew faster, the broad middle class — the triumph of American democracy — was forged, and the debt as a percentage of GDP declined steadily down to less than 32% when Ronald Reagan took office.

None of this was easy or smooth. There were strikes and upheavals. Inflation and unemployment plagued the post-war transition. The Korean War divided the country.
Conservatives at the time were as timorous and noisome as they are now. Led by Ohio Senator Bob Taft, they opposed the creation of NATO. They railed about deficit spending. They waged war on labor unions. They hunted communists at home and abroad, trampling basic liberties in the process. They conjured up preposterous conspiracy theories about treachery within. American politics were even more poisonous than now. And black GIs returning from the war found that their service did not exempt them from the legalized apartheid that still scarred the country.

But a confident America didn’t let the frightened and the crazed get in the way of doing what was necessary to forge a prosperous future. Eisenhower reaffirmed the New Deal reforms. Social Security was preserved; finance remained shackled; top end tax rates stayed at 90%; labor’s right to organize was weakened but not gutted. A confident and broad middle class replaced the extreme inequality that contributed to the Great Depression. We all grew together.

The contrast with the present day is stark. Now as we remain mired in two costly and endless wars, and emerge from the Great Recession, the timorous have taken control. Our national debt — about 90% of GDP — is far lower a burden than it was after World War II, but our deficit in confidence is far higher.

Instead of forging the new economy needed to revive a broad and prosperous middle class, we are focused on balancing our accounts. With states and localities facing crippling budget crises, with school districts shutting down summer school, eliminating after school programs from athletics to tutorials, laying off teachers and increasing class size, the Congress blocks vitally needed bills to provide aid to states, and to put people to work. The president acknowledges a staggering public investment deficit in the foundations of a new economy — in education and training, modern infrastructure, research and development – and then calls for a three year hard freeze on domestic spending, while the military budget continues to rise. Republicans and conservative Democrats join with the banking lobby to weaken financial reform, with big oil to frustrate the transition to new energy, with the insurance and drug companies to sustain an unaffordable health care system.

Wall Street billionaire Pete Peterson enlists major foundations to rouse fears about debt, with “entitlements” — meaning Social Security and Medicare as his major targets. The president sets up a deficit commission tasked with balancing the budget, not with defining the foundations of a new economy that would enable us to grow our way out of debt and rebuild a prosperous middle class.

President Obama is far better prepared for this moment than Harry S. Truman was. He has been clear about the need to build a new economy out of the ruins of the old. He has detailed core elements of that task — public investments in areas vital to our future, making the transition to new energy, balancing our trade and making things in America once more, shrinking finance and curbing the casino, empowering workers to gain a fair share of the profits and productivity they help produce, fixing our broken health care system — the source of those terrifying long-term deficits that Peterson brandishes and distorts.

But the president is now in retreat. His call to action has been muddled by pollsters and positioning. Conservatives peddle fear and conspiracies as they did after World War II, but this time America’s leaders are cowed, letting the frightened block the bold measures needed to forge our future.

Needless to say, our current circumstances are far different than those at the end of World War II. Then we were victorious; now we are losing in Afghanistan. Then we were unified; the entire nation had sacrificed in the Depression and the war. Now we are divided, more unequal than ever; and the wars are fought by professionals out of the public consciousness. Then we had pent up private savings from years of wartime rationing; now household debt remains near record levels. Then the rest of the world was devastated; now America faces a surging and mercantilist Asia, an export addicted Germany.

But these are circumstances, not fate. The real contrast is in our confidence. Americans have grown fearful. We doubt our ability to pursue a common purpose. For good reason, we lack faith in our institutions – whether government or business or the banks. But instead of steeling our spine, we are daunted by the obstacles. Bluster substitutes for courage. We focus on balancing our accounts, not forging our future. That is a recipe for decline.

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Robert Borosage and Campaign for America’s Future Co-Director Roger Hickey are co-editors of the book, The Next Agenda: Blueprint for a New Progressive Movement.

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Follow Robert L. Borosage on Twitter: www.twitter.com/borosage

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This piece first appeared on The Huffington Post

 By Roger Hickey
Co-Director of the Campaign for America’s Future

Anne Kim and Jonathan Cowan of Third Way took to the Politico Arena op-ed page (and website) on Thursday with the hoary slander that progressives care only about “expanding the entitlement state” and have no interest in economic growth or expanding wealth. Apparently blind to the worst economic downturn since the Great Depression, they then replay New Democrat staples from the 1990s as if they were somehow new or relevant. They get it wrong.

As Barack Obama took charge of an economy in free fall, progressives urged the new administration to undertake the largest investment-led stimulus in our history. Third Way Democrats worked to make it smaller and weaker. Despite that, the recovery act did stop the fall and begin to pull the country out of recession. With unemployment still nearly at 10%, progressives continue to push for more job creation and aid to the states to forestall brutal cuts in teachers and police and other vital services.

Looking towards the new economy that we must build out of the ruins of the old, the president has it right. We can’t go back to the old bubble-bust economy built on debt and speculation. We need to build on a new foundation. That includes public investment in areas vital to our future: education and training, a 21st century infrastructure, research and development, new energy. It includes a new global strategy and industrial policy to insure that we make things in America once more. And it should include an extension of our basic social contract, insuring retirement security, affordable health care and education, a living wage and safe working conditions, first rate public education to all Americans. On that foundation, we can build an economy – as we did after World War II – that works for working people, and revives America’s broad middle class.

Kim and Cowan recycle the conservative canard that progressive support for the Obama health care plan is motivated by a desire to turn the US into (gasp!) Denmark, where (they think) everyone lives on “entitlements.” Apparently these Third Way Democrats reject the argument advanced by their Democratic president that health care reform, in addition to being a matter of economic justice, is also the first step toward getting control of health care costs — which every economist agrees is the real driver of long term public deficits. (Denmark, with a more comprehensive public healthcare system spends only 9.8 percent of it’s GDP on health care. The US spends 16 percent. Far from luxuriating on entitlements, the Danes have the most extensive worker training program in Europe, successfully sustaining a high wage economy that enjoys a trading surplus with its neighbors. Denmark has also outpaced the US in exports. They have a 2.2 percent trade surplus compared to the 5.2 percent US chronic trade deficit.

There is one thought in the Kim-Cowan op-ed that every progressive completely agrees with: they say we can deal with growing deficits “only if we generate the kind of supercharged economic growth we had in the 1950s and mid-60s.” Exactly.

But how do these Third Way Democrats propose to achieve that kind of growth? Their program is austerity for the paycheck class (cutting spending on vital domestic investments) and tax cuts for business and the wealthy.

Right now, conservative Democrats, especially in the Senate, are resisting efforts to invest in more job growth – and efforts to help the states who are cutting back spending and firing public workers, making the economy worse.

Progressive Democrats are pushing for more spending on jobs. But Third Way austerity advocates in the Congress (and in the President’s deficit commission) want to slash spending (and cut Social Security and Medicare). All this threatens to choke off a still-fragile economic recovery. Their tax cuts for the wealthy reflect a trickle down economics that led us into our present straits, and ignore the reality of a tax code in which Warren Buffett, one of America’s wealthiest men, admits he pays a lower tax rate than his secretary. Kim-Cowan might want to check the tax rates of the 50-60s (which included a 90% upper tax bracket) before touting that as their model.

You would think Third Way Democrats, who post “growth and wealth creation” on their op-ed banner would spend a little time explaining the economic crisis that has just seen massive and dangerous economic contraction — and destroyed several generations of wealth. Instead they blame progressives who pushed for “entitlements.”

For three decades, government economic policy has been dominated by a conservative ideology that is not so much pro-business as obsequious to a set of business interests that ultimately had little to do with the long-term health of the national economy. It was an ideology that said we could send much of our manufacturing base overseas; see millions of living-wage jobs disappear and not be replaced with other secure, living-wage jobs; and still somehow prosper on a economy largely based on finance, information and services. It was an ideology that has given us an historic concentration of wealth at the very top — 65 percent of the income growth since 2000 has gone to the wealthiest 1 percent of the population, while median household incomes have dropped 4 percent when adjusted for inflation.

As it turns out, there is nothing pro-growth about tax cuts that further enrich the wealthy but starve our schools and allow our infrastructure to crumble. There’s nothing pro-business about having regulatory agencies turn a blind eye to Wall Street greed, in the mistaken belief that addicted gamblers will police themselves amid the glittering lights of the Wall Street casino. There is certainly nothing pro-wealth in the decades-long effort by conservatives to weaken unions and otherwise disempower workers; the “experiments to eliminate teacher tenure” that Kim and Cowan apparently applaud are but one example of the effort to treat workers as disposable and suppress their wages.

And it is more than a little bizarre to recycle the New Dem 1990 agenda for the economy coming out of the mess. “Experiments to eliminate teacher tenure” is but idle chatter at a time when literally tens of thousands of teachers, tenured or not, are facing layoffs in the brutal budgets of states and localities. Kim-Cowan support affordable college–but fail to note that despite passing the greatest increase in student aid since the GI Bill, soaring tuitions are pricing college out of the reach of more and more students.

The old nostrums of the right have been tried and failed. The New Dem/Third Way conservative light program offers no remedy. This country must, as the president has stated, build on a new foundation. The Kim-Cowan call to go back to the 1990s won’t get us there.

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Roger Hickey was a leader of the campaign to stop the privatization of Social Security, and he is a founder and member of the steering committee of Health Care for America Now. In the late 1980s, he and Jeff Faux created the Economic Policy Institute. 

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Follow Roger Hickey on Twitter: www.twitter.com/rogerhickey

 

Robert Borosage

 

By Robert L. Borosage
Co-Director Campaign for America’s Future

Last year we worried about homes below water; now it is the economy itself that is sinking. Warren Buffett says the US economy has “fallen off a cliff.” And, as bad as the US is, the rest of the world is worse. Germany’s exports have collapsed; Japan is in free fall; much of Eastern Europe may join Iceland in bankruptcy. The Asian Development Bank estimates the loss to financial assets worldwide at $50 trillion dollars – the equivalent of a full year of annual global output. It’s not for nothing that National Intelligence Director Dennis Blair announced that the economic collapse trumps terrorism and catastrophic climate change as the greatest threat to US security.

After slogging through the stimulus, the banking mess and the foreclosure crisis, our besieged president now must turn his attention to organizing global cooperation to lift the world economy. Finance ministers of the group of 20 countries (G-20) meet near London this week; the heads of state gather on April 2. The agenda: whether to expand national stimulus plans, how to forestall a banking collapse, and help for the weaker countries that can’t help themselves. Rhetoric won’t cut it; real commitments have to be made. As the anti-Bush, Obama has been celebrated by much of the world as if he walks on water. Now, we’ll see if they will follow the savior rather than crucify him.

We need every major economy – particularly those like Germany, Japan and China in the best position to do so – to help boost the global economy with bold national, deficit financed, recovery plans. We can’t do this alone. Our own stimulus – about 2% of GDP in 2009 – is too small even to lift this economy. Everyone has to grab a bucket and start bailing.

Moreover, gaining this consensus will help put the world on notice that the old ways are gone. We’re not going back to an economy in which the US borrows $2 billion a day from abroad, while serving as the world’s consumer of last resort. The Chinese, Japanese, Germans and other nations have to move away from export-led growth. The unsustainable trade imbalances – with the US absorbing 70% of the world’s savings – provided the flood of cheap capital that eventually capsized the global economy.

That world is over. US consumers are already tightening their belts. Exports have collapsed. If we ever begin a recovery, the US should seek more balanced trade. That means we will have to sell stuff beyond toxic financial paper to the rest of the world. Obama anticipates this with his drive for new energy, an industrial policy that may allow the US to gain an edge in the green markets of the future.

At the same time, China, Germany, Japan and the mercantilist nations will have to stop relying on exports for their growth. For Germany, the world’s largest exporter, exports made up an estimated 41% of GDP last year. That can’t go on. The first step is for the countries to stimulate internal demand to help get the global economy going once more, and thereby begin the wrenching journey they will have to make to more balanced growth.

Here as elsewhere in this economic debacle, the leaders remain behind the curve. On Monday, the European finance ministers announced that they had no plans to add to recent stimulus plans, dismissing US pleas for expansion as, in the words of the European Chair, “not to our liking.”

The Chinese initially trumpeted a large internal public works stimulus, much of which turned out to already be in the five year plan. Now Chen Deming, the commerce minister, declares China plans to subsidize exporters and lower export taxes, saying that we “should increase our share of the global market. We must transform ourselves from a big export nation to a strong export nation.” Nightmare.

G-20 conferences have generally been for show. The stakes are real this time – and the odds going in are against the president in gaining the bold action needed. And once more he’ll be out there virtually on his own, taking on the real deal in stark contrast with his opposition here at home. The conservative claque is ranting about socialism. Blue dog Democrats like Sen. Kent Conrad are mobilizing to defend agribusiness subsidies, while the Republican leaders simply don’t get it. Rep. John Boehner, the perpetually tanned House minority leader, last week called for a freeze on all spending over the next year, something like putting a pillow over the mouth of someone suffocating to death. And Sen. John McCain, the party’s nominee, woke to deliver one of his dyspeptic lectures against earmarks; the patient is hemorrhaging blood, but the Senator is worried about the pimples on his face.

The Europeans want to wait and see. The Chinese are subsidizing exporters. The Republicans are railing about earmarks and socialism. Obama’s call for a new responsibility hasn’t exactly taken hold.