Hosted by robt.shepherd
How do you like my page?
The first cornerstone of a strong and growing middle class has to be an economy that generates more good jobs in durable, growing industries.
(President Barack Obama)

Republicans were hoping
Economy would Fail

Former President Bush (41) said NO ONE should hope the president fails

Four years ago, as a newly elected president Obama began his efforts to rescue the economy and strengthen the social safety net, conservative economic pundits -- people who claimed to understand markets and know how to satisfy them -- warned of imminent financial disaster. Stocks, they declared, would plunge, while interest rates would soar.

Dow Hits 3rd New High, Helped by Jobless Report (March 8, 2013)

by Paul Krugman

Paul Krugman   Even a casual trawl through the headlines of the time turns up one dire pronouncement after another. “Obama’s radicalism is killing the Dow,” warned an op-ed article by Michael Boskin, an economic adviser to both Presidents Bush. “The disciplinarians of U.S. policy makers return,” declared The Wall Street Journal, warning that the “bond vigilantes” would soon push Treasury yields to destructive heights.

Sure enough, this week the Dow Jones industrial average has been hitting all-time highs, while the current yield on 10-year U.S. government bonds is roughly half what it was when The Journal published that screed.

O.K., everyone makes a bad prediction now and then. But these predictions have special significance, and not just because the people who made them have had such a remarkable track record of error these past several years.

No, the important point about these particular bad predictions is that they came from people who constantly invoke the potential wrath of the markets as a reason we must follow their policy advice. Don’t try to cover America’s uninsured, they told us; if you do, you will undermine business confidence and the stock market will tank. Don’t try to reform Wall Street, or even criticize its abuses; you’ll hurt the plutocrats’ feelings, and that will lead to plunging markets. Don’t try to fight unemployment with higher government spending; if you do, interest rates will skyrocket.

And, of course, do slash Social Security, Medicare and Medicaid right away, or the markets will punish you for your presumption.

By the way, I’m not just talking about the hard right; a fair number of self-proclaimed centrists play the same game. For example, two years ago, Erskine Bowles and Alan Simpson warned us to expect an attack of the bond vigilantes within, um, two years unless we adopted, you guessed it, Simpson-Bowles.

So what the bad predictions tell us is that we are, in effect, dealing with priests who demand human sacrifices to appease their angry gods — but who actually have no insight whatsoever into what those gods actually want, and are simply projecting their own preferences onto the alleged mind of the market.

What, then, are the markets actually telling us?

I wish I could say that it’s all good news, but it isn’t. Those low interest rates are the sign of an economy that is nowhere near to a full recovery from the financial crisis of 2008, while the high level of stock prices shouldn’t be cause for celebration; it is, in large part, a reflection of the growing disconnect between productivity and wages.

The interest-rate story is fairly simple. As some of us have been trying to explain for four years and more, the financial crisis and the bursting of the housing bubble created a situation in which almost all of the economy’s major players are simultaneously trying to pay down debt by spending less than their income. Since my spending is your income and your spending is my income, this means a deeply depressed economy. It also means low interest rates, because another way to look at our situation is, to put it loosely, that right now everyone wants to save and nobody wants to invest. So we’re awash in desired savings with no place to go, and those excess savings are driving down borrowing costs.

Under these conditions, of course, the government should ignore its short-run deficit and ramp up spending to support the economy. Unfortunately, policy makers have been intimidated by those false priests, who have convinced them that they must pursue austerity or face the wrath of the invisible market gods.

Meanwhile, about the stock market: Stocks are high, in part, because bond yields are so low, and investors have to put their money somewhere. It’s also true, however, that while the economy remains deeply depressed, corporate profits have staged a strong recovery. And that’s a bad thing! Not only are workers failing to share in the fruits of their own rising productivity, hundreds of billions of dollars are piling up in the treasuries of corporations that, facing weak consumer demand, see no reason to put those dollars to work.

So the message from the markets is by no means a happy one. What the markets are clearly saying, however, is that the fears and prejudices that have dominated Washington discussion for years are entirely misguided. And they’re also telling us that the people who have been feeding those fears and peddling those prejudices don’t have a clue about how the economy actually works.

The Federalist Founding Fathers had a Can-Do Attitude

President Obama says

We must rebuild an economy where everyone who works hard can get ahead
Over the last two centuries, U.S. growth rates have far outpaced growth rates throughout the world, producing per capita incomes about six times greater than the world average and 50 percent higher than those in Europe. Put another way, the United States holds 4.5 percent of the world’s population, and produces a staggering 22 percent of the world’s output—a fraction that has remained stable for two decades, despite growing competition from around the world.

This predominance isn’t new. The late British economist Angus Maddison observed that American per capita income was already the highest in the world in the 1830s. Today the U.S. dollar is the international reserve currency. English is the world’s standard language for commerce. The strength of our economy allows us to maintain the mightiest military in the world. And U.S. culture—film, TV, the Internet—is preeminent in the world (But see president's rebuke of Kardashians, Kanye West). A disproportionate number of the world’s great inventions in medicine, pharmaceuticals, electronics, the Internet, and other technology come from America, improving, expanding, and saving lives. America was where the telephone, the automobile, the airplane, and the iPhone were invented. Americans were the first to walk on the moon.

Historically, our nation has enjoyed remarkable economic mobility. About 60 percent of the households that were in the lowest income quintile in 1999 were in a higher quintile ten years later. During the same decade, almost 40 percent of the richest households fell to a lower quintile. This is a nation where you can rise or fall. It is a nation where you can climb the economic ladder based not on who you are born to, or what class you are born into, but based on your talents, your passion, your perseverance, and the content of your character.

Rafaël Edwardo Cruz

Princeton University

Teddy Roosevelt :

Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism, and the effort to destroy them would be futile unless accomplished in ways that would work the utmost mischief to the entire body politic. We can do nothing of good in the way of regulating and supervising these corporations until we fix clearly in our minds that we are not attacking the corporations, but endeavoring to do away with any evil in them. We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good. We draw the line against misconduct, not against wealth.

The Conscience of a Liberal


Paul Krugman

W.W. Norton & Company, 2007

In 1960, Senator Barry Goldwater's Conscience of a Conservative appeared. Forty-seven years later, economics professor and New York Times columnist Paul Krugman, soon to be Nobel prize winner, had a book published with a similar title.

In Conscious of a Liberal, Krugman describes a long Gilded Age as lasting from the 1870s to the Great Depression around 1930. He writes that it was a time of "vast inequality in wealth and power, in which a nominally democratic political system failed to represent the economic interests of the majority." He describes with some detail a "wealthy elite" dominating the political life of the country. The power of the state was used to protect property interests, and there had been an "uncritical acceptance of a conservative ideology that warned that any attempt to help the less fortunate would lead to economic disaster."

He describes income distribution for the 1920s, excluding capital gains, as follows: the highest ten percent in income was receiving 43.6 percent of the total income; the highest one percent in income was receiving 17.3 percent.

He indicates that the income distribution figures for 2005 were similar: 44.3 percent for the highest ten percent in income, and 17.4 percent for the highest one percent.

Krugman writes that the Great Depression smashed the Gilded Age. He writes of the reforms of President Franklin Roosevelt taking away much from the wealthy. The richest 0.1 percent "owned more than 20 percent of the nation's wealth in 1929 but only around 10 percent in the mid-1950s." Krugman writes that "Basically the New Deal taxed away much, perhaps most, of their income." He adds that blue collar workers – above all, industrial workers – were the biggest beneficiaries." He describes the mid-1940s to the mid-seventies, as a "golden age of manual labor."

The new distribution of wealth (called by Krugman and some others The Great Compression) far from destroying prosperity, "seems if anything to have invigorated the economy." With World War II came a "great boom in wages" that "lifted tens of million of Americans ...from urban slums and rural poverty to a life of home ownership and unprecedented comfort." With Roosevelt's policies in place, a postwar middle-class society arose "in just a few years." It was, says Krugman, politics taking the lead rather than the "impersonal economic forces" that those hostile to Roosevelt preferred.

President Eisenhower was a Republican who accepted Roosevelt's New Deal, but during his presidency there were Republicans who resented Eisenhower's liberalism. Writes Krugman: "Even as Dwight Eisenhower was preaching the virtues of a toned-down 'modern' Republicanism, a new kind of conservative was beginning to emerge... They saw themselves as outsiders challenging establishment." He continues that "In 1964 a coalition of conservative activists seized control of the Republican National Convention and nominated Barry Goldwater for president." The Nixon presidency, writes Krugman, was a transition period rather than a triumph for the new conservatism. "It was during the Nixon years that the successful execution of dirty tricks became a passport to advancement in the Republican Party."

In the 1980s came a big triumph for the new conservatives: the Reagan administration. "Supply-side" economics was championed by the new conservatives. This doctrine, writes Krugman, "claimed without evidence that tax cuts would pay for themselves," but it "never got any traction in the world of professional economic research."

Krugman writes that with conservatives wielding political power, "economists began documenting a sharp rise in inequality: a small number of people were pulling far ahead, while most Americans saw little or no economic progress." He writes that "If gains in productivity had been evenly shared across the work force, the typical worker's income would be about 35 percent higher now [2007?] than it was in the early seventies." [note] 

Krugman summarizes saying that "those of us who call ourselves liberal are, in an important sense, conservative, while those who call themselves conservative are for the most part deeply radical. Liberals want to restore the middle-class society I grew up in; those who call themselves conservative want to take us back to the Gilded Age, undoing a century of history."

Krugman's chapter headings:

  1. The Way We Were

  2. The Long Gilded Age

  3. The Great Compression

  4. The Politics of the Welfare State

  5. The Sixties: A Troubled Prosperity

  6. Movement Conservatism

  7. The Great Divergence

  8. The Politics of Inequality

  9. Weapons of Mass Distraction

10. The New Politics of Inequality

11. The Health Care Imperative

12. Confronting Inequality

13. The Conscience of a Liberal

More on Paul Krugman's Conscience of a Liberal

How the resurgence of a thriving middle class is essential for future

Obama focus on resurgent middle class results in positive outcomes

Not only ethics but self-interest - Thriving Middle Class is the key to overall prosperity

When you give to the poor you "LEND" to God (it will come back to help you, too) Proverbs 19:17

Economic "law" : helping the poor helps us all (the poor don't "stash" their cash, they return it to circulation)

Democrats support our veterans

Site maintained by
Robert Shepherd

Robert Shepherd
friend me (facebook)