Politics & Law

Obama’s Republican narrative of our economic woes

Robert Reich

Quiz: What’s responsible for the lousy economy most Americans continue to wallow in?

A. Big government, bureaucrats, and the cultural and intellectual elites who back them.

B. Big business, Wall Street, and the powerful and privileged who represent them.

These are the two competing stories Americans are telling one another.

Yes, I know: It’s more complicated than this. In reality, the lousy economy is due to insufficient demand – the result of the nation’s almost unprecedented concentration of income at the top. The very rich don’t spend as much of their income as the middle. And since the housing bubble burst, the middle class hasn’t had the buying power to keep the economy going. That concentration of income, in turn, is due to globalization and technological change – along with unprecedented campaign contributions and lobbying designed to make the rich even richer and do nothing to help average Americans, insider trading, and political bribery.

So B is closer to the truth.

But A is the story Republicans and right-wingers tell. It’s a dangerous story because it deflects attention from the real problem and makes it harder for America to focus on the real solution – which is more widely shared prosperity. (I get into how we might do this in my new book, Aftershock.)

A is also the story President Obama is telling, indirectly, through his deficit commission, his freeze on federal pay, his freeze on discretionary spending, and his waivering on extending the Bush tax cuts for the rich.

Most other Washington Democrats are falling into the same trap.

If Obama and the Democrats were serious about story B they’d at least mention it. They’d tell the nation that income and wealth haven’t been this concentrated at the top since 1928, the year before the Great Crash. They’d be indignant about the secret money funneled into midterm campaigns. They’d demand Congress pass the Disclose Act so the public would know where the money comes from.

They’d introduce legislation to curb Wall Street bonuses – exactly what European leaders are doing with their financial firms. They’d demand that the big banks, now profitable after taxpayer bailouts, reorganize the mortgage debt of distressed homeowners. They’d call for a new WPA to put the unemployed back to work, and pay for it with a tax surcharge on incomes over $1 million.

They’d insist on extended unemployment benefits for long-term jobless who are now exhausting their benefits. And they’d hang tough on the Bush tax cuts for the wealthy – daring Republicans to vote against extending the cuts for everyone else.

But Obama is doing none of this. Instead, he’s telling story A.

Making a big deal out of the deficit – appointing a deficit commission and letting them grandstand with a plan to cut $4 trillion out of the projected deficit over the next ten years — $3 of government spending for every $1 of tax increase – is telling story A.

What the public hears is that our economic problems stem from too much government and that if we reduce government spending we’ll be fine.

Announcing a two-year freeze on federal salaries – explaining that “I did not reach this decision easily… these are people’s lives” – is also telling story A.

What the public hears is government bureaucrats are being paid too much, and that if we get the federal payroll under control we’ll all be better off.

Proposing a freeze on discretionary (non-defense) spending is telling story A. So is signaling a willingness to extend the Bush tax cuts to the top. So is appointing his top economic advisor from Wall Street (as apparently he’s about to do).

In fact, the unwillingness of the President and Washinton Democrats to tell story B itself promotes story A, because in the absence of an alternative narrative the Republican story is the only one the public hears.

Obama’s advisors explain the President’s moves are designed to “preempt” the resurgent Republicans – just like Bill Clinton preempted the Gingrich crowd by announcing “the era of big government is over” and then tacking right.

They’re wrong. By telling story A and burying story B, the President legitimizes everything the right has been saying. He doesn’t preempt them; he fuels them. He gives them more grounds for voting against raising the debt ceiling in a few weeks. He strengthens their argument against additional spending for extended unemployment benefits. He legitimizes their argument against additional stimulus spending.

Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn’t legitimize the Republican world view. Obama doesn’t have that luxury. The American public is still hurting and they want to know why.

Unless the President and Democrats explain why the economy still stinks for most Americans and offer a plan to fix it, the Republican explanation and solution – it’s big government’s fault, and all we need do is shrink it – will prevail.

That will mean more hardship for tens of millions of Americans. It will make it harder to remedy the bad economy. And it will set Republicans up for bigger wins in the future.

Cross-posted from Robert Reich’s blog.

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Comments to "Obama’s Republican narrative of our economic woes":
    • Les James

      I heard an acquaintance recently say something to the effect that he or she is making some changes in how to accomplish some routine tasks in order to save money. Sounds laudable and prudent. But the money saved would likely have contributed to someone else’s income. Now the more people who act prudently the more the economy shrinks. This in turn may lead to calls for more “belt-tightening”, and so on. A dead economy is the ironic result of everyone managing their money wisely.

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    • Susan

      Obama now has to defend his tax bill in front of his own party who said today that they were going to vote it down. Its amazing what’s going on in our government and how our elected officials care more about their careers than the people they support.

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    • James R

      I’ve hardly contradicted myself. I said, “if” the rich have sidelined their money, and “usually” they invest it. One implicit assumption I make about the rich is that they come in two flavors: those who get rich by gaming the system, often rigged in their favor by politicians (trial lawyers and banksters, for instance), and those who get rich by being brilliant in business, providing a service or product which the public wants or investing in promising ideas.

      As for the accusation by Steve that I am a fear monger, well, what’s so bad about spreading a little fear about massive demographic change which is driving up crime rates and overloading the social safety net? If current immigration trends persist we will be the size of India in 2100, with a majority third world population. PC attitudes about immigration have made us stupid about what it will do to the quality of life, especially for our children and grand children.

      By the way, Steve, sláinte chugat. My ancestors immigrated to the US from Ireland, too. So what’s your point? The Irish spoke English and were indiscernible from the native population in a generation. Today’s immigrants, especially Hispanics, have a five generation track record of failure. Now they are on track to become a majority in California. How’s that working out?

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    • Steve Shackley

      It’s not clear whether James R is predicting the future or describing the present: “So, Reich’s point that our consumption based economy has stalled because the rich have more money and spend less sounds like sophistry. They also invest more. Hell, they usually invest everything that they don’t need for expenses — provided they don’t get heavily penalized for making a profit.” Wow, that’s true, but few invest here, well except for those “industrialists” that employ the immigrants in jobs Americans won’t do and scream about controlling immigration. Then:

      “If the rich have sidelined their money its because they know Hope and Change is really a code phrase for private wealth redistribution.” Again, wow this contradicts James R’s previous point. So what is it, they are investing or they’re sidelining their money. I believe even by James R’s admission, that the redistribution has been upward for decades.

      Nice one here: “Given the growing power of Dems due to immigration induced demographic shifts, we are about 4 or 5 election cycles away from a Venezuelan type takeover of big chunks of the private sector.” Wow, 1000 quickly deteriorating U.S. dollars says the opposite will happen – is happening. You mentioned health care; this is private crime writ large on the American people.

      I always like to find some common ground with James R. He’s right, both Democrats (at least the DINOs) and Republicans are equally responsible for allowing American businesses to offshore jobs. That’s a much more relevant point that immigrants taking our jobs away.

      James’s immigrant fear mongering sounds like the way my Irish ancestors were treated. Now many are important and contributing members of society, yes even in the Republican Party and nitwit Tea Party. Immigrants aren’t the problem, particularly since so many pay taxes and Social Security, since the rich have so many ways to avoid taxation. The supply side myth that making the rich even richer has never shown any truth, but the middle class spends it within the economy and that’s the truth (see above).

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    • James R

      “Quiz: What’s responsible for the lousy economy most Americans continue to wallow in?”

      A and B are hardly disjoint sets. Indeed, they are practically one and the same, since many big players migrate between the two camps. And Reich adduces no proof in the way of polls to back up his point that most Americans blame one or the other. Moreover, Reich is guilty of a false dichotomy with his big business vs big government blame scenarios. To me, it seems that A & B have found common ground: a general approval of mass immigration, which brings 13 million job seekers into the US over a 10 year period when the country had a net loss of 1 million jobs, mainly due to job off-shoring to India and China done with the full support and approval of Democrats and Republicans. Big government likes Big Immigration because non-white immigrants overwhelmingly vote for redistributionist politicians, who essentially buy votes with welfare, social services, and affirmative action laws, which further balloon the size of the government. Big business also likes high unemployment and lots of immigrants; both drive down wages pretty much for all jobs paying under $100K a year.

      So, Reich’s point that our consumption based economy has stalled because the rich have more money and spend less sounds like sophistry. They also invest more. Hell, they usually invest everything that they don’t need for expenses — provided they don’t get heavily penalized for making a profit. If the rich have sidelined their money its because they know Hope and Change is really a code phrase for private wealth redistribution. We saw it with the GM bankruptcy where supposedly secured bond holders were robbed of their investment which was then handed over to Obama supporting unions. There was the stimulus which was just a payoff to more Obama supporters on a massive scale, including the “green” industry and the public sector, which produces nothing. Next we have a political hermaphrodite Fed chairman threatening to turn our savings into confetti by printing more money if we don’t go out and spend, spend, spend right now — even though this is hardly in ones self interest if one feels insecure about ones job (like most of us, though probably not Prof Reich).

      So don’t expect wealth to suddenly flood into the job creating sector anytime soon due to consumption or investment. Given the growing power of Dems due to immigration induced demographic shifts, we are about 4 or 5 election cycles away from a Venezuelan type takeover of big chunks of the private sector. Obama has begun this process with the private health care sector in the US. The long term results will be similar to the South African gold mining industry. It’s in a shambles because neither local nor foreign businessmen want to invest millions to make capital improvements in companies that the ANC says it would like to nationalize. Similarly in the US, health care will start to rot first, then it will be the power industry burdened with non-nonsensical carbon emission mandates. Inevitably, we will have a sclerotic Mexican style economy which pours vast amounts of wealth into the pockets of elite gangster capitalists, whose wealth will be based on family and political connections (and utterly meaningless elite degrees), not entrepreneurial brilliance.

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