Some of the better, IMHO, reality-based reads of the week (so far, still a day to go) on our economy:
The Ongoing Destruction of Our Middle Class
A piece currently running in the International Online version of Germany's Spiegel, by Thomas Schulz: "The Erosion of America's Middle Class." (See excerpt, below.)
"Austerian" Hysteria, Political Pandering and Social Security
Which Party Poses the Real Risk to Social Security's Future? A Marshall Auerback guest post at Naked Capitalism, from Monday. (See below.)
Three posts from
Calculated Risk from Thursday, August 19th (alone, just one day of god-awful economic story after story that screams to me:
"If this is 'the Recovery,' god forbid if we ever officially enter into a double-dip."):
Commercial Real Estate: Moody's: Commercial Real Estate Price Index declines 4% in June.
Ongoing Economic Contraction: Philly Fed Index shows contraction in August, first time since July 2009.
Unemployment: Weekly initial unemployment claims at 500,000, highest since November 2009.
All in one day's news cycle!
Foreclosures
The NY Times lead editorial from Friday: Foreclosures Grind On.
Financial Reform
AFL-CIO: Stronger Financial Reform Would Have Saved Jobs, by Simon Johnson over at his Baseline Scenario blog.
The Status Quo/Business As Usual
When Wall Street Rules, We Get Wall Street Rules, from economist Dean Baker, currently near the top of the FP over at HuffPo.
Paul Krugman's two columns in this week's NY Times, from Monday and Friday--
Social Security: Attacking Social Security
Deficit Hawks: Appeasing the Bond Gods
"The Dismal Science"
Joe Stiglitz' commentary via the Financial Times: Needed: a new economic paradigm.
This kind of quasi-Euro-"Austerian" commentary pretty much sums it all up in what was, IMHO, a "slow" news week for the economy...
The Erosion of America's Middle Class
By Thomas Schulz
Spiegel (International Online Edition)
August 19th, 2010
...For people in the lower income brackets, the recovery already seems to be falling apart. Experts fear that the US economy could remain weak for many years to come. And despite the many government assistance programs, the small amount of hope they engender has yet to be felt by the general public. On the contrary, for many people things are still headed dramatically downward.
According to a recent opinion poll, 70 percent of Americans believe that the recession is still in full swing. And this time it isn't just the poor who are especially hard-hit, as they usually are during recessions.
This time the recession is also affecting well-educated people who had been earning a good living until now. These people, who see themselves as solidly middle-class, now feel more threatened than ever before in the country's history. Four out of 10 Americans who consider themselves part of this class believe that they will be unable to maintain their social status.
Unemployment Persists
In a recent cover story titled "So long, middle class," the New York Post presented its readers with "25 statistics that prove that the middle class is being systematically wiped out of existence in America." Last week, the leading online columnist Arianna Huffington issued the almost apocalyptic warning that "America is in danger of becoming a Third World country."
In fact, the United States, in the wake of a real estate, financial economic and now debt crisis, which it still hasn't overcome, is threatened by a social Ice Age more severe than anything the country has seen since the Great Depression...
And, last but definitely not least, I have to say: WTF!? (Sometimes, we Democrats are our own worst enemy.)
(Even Krugman acknowledged this week, while slamming GOP'er Paul Ryan on Monday, that it's not just Republicans encouraging the "austerian," anti-entitlement meme.)
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(Diarist's Note: Diarist has received written authorization from Naked Capitalism Publisher Yves Smith to print her blog's posts in their entirety.)
Auerback: Which Party Poses the Real Risk to Social Security's Future?
Naked Capitalism
Monday, August 16, 2010
By Marshall Auerback, a portfolio strategist and fund manager who writes at New Deal 2.0
Hint: it's not Republicans.
Social Security remains one of the greatest achievements of the Democratic Party since its creation 75 years ago. Although Republicans have historically fulminated against the program (Ronald Reagan once likened it as something akin to "socialism"), they have actually made little headway in touching this sacred "third rail" in American politics. President Bush pushed for partial privatization of the program in 2005, but the proposal gained no policy traction (even within his own party) because Social Security continues to be hugely popular with American voters. It's a universal program that benefits all Americans, not a government handout to a few privileged corporations.
Which is why it's odd that Democrats seem almost embarrassed to continue to champion the legacy of FDR. The party frets about long-term deficits and the corresponding need to "save" Social Security from imminent bankruptcy and, in doing so, opens the gate to radical cuts in entitlements that will do nothing but further destroy incomes and perpetuate our current economic malaise. It is true that some Republicans have signed on to the idea of privatization, notably a proposal championed by Rep. Paul D. Ryan (Wis.), the senior Republican on the House Budget Committee. But only a handful of GOP lawmakers have actively embraced the measure and, in the aftermath of the worst shock to the financial system since the Great Depression, many Republican lawmakers would just as soon see the idea forgotten.
So why don't the Democrats leave well enough alone? Why bother even setting up "bipartisan commissions" to discuss the issue of Social Security? At the risk of sounding like one of those ungrateful members of the "Professional Left", whom Robert Gibbs recently decried, I note that it was President Obama who most recently re-opened this issue by setting up a commission on reducing long term budget deficits and dealing with the long term issue of entitlements, including Social Security. In the Commission's remit, nothing is off the table, including Social Security and Medicare. (Of course, given that one of the members is a director of Honeywell, it's hard to envisage any suggestions of defense cuts). I also note that according to the Washington Post, "Democrats said Simpson and Bowles are uniquely equipped to blaze a path out of the fiscal wilderness -- and to forge bipartisan consensus on a plan likely to require painful tax increases as well as program cuts." No mention of Republicans getting on board. This is self-immolation, plain and simple. And Obama wonders why voters remain unhappy?
Now that the President has opened this Pandora's Box, it is hard for him credibly to make the case, as he attempted to do in last Saturday's weekly radio address, that "some Republican leaders in Congress want to privatize Social Security." In fact, it is an idea enthusiastically embraced by a number of Wall Street Democrats who are funded with huge campaign contributions from Wall Street itself. (Candidate Obama received more money from Wall Street in 2008 than Hillary Clinton.) These contributors would be the Rubinites who for decades have played a huge role in allowing for greater financial leverage ratios, riskier banking practices, greater opacity, less oversight and regulation, consolidation of power in `too big to fail' financial institutions that operated across the financial services spectrum (combining commercial banking, investment banking and insurance) and greater risk. Privatization of Social Security represents the last of the low hanging fruits for Wall Street. Who better to provide this to our captains of the financial services industry than their major political benefactors in the Democratic Party?
The issue of privatization is germane when one considers the members of the Commission approved by the President. There are questions of possible conflicts of interest. As James Galbraith has noted, the Commission has accepted support from Peter G. Peterson, a man who has been one of the leading campaigners to cut Social Security and Medicare. It is co-chaired by Erskine Bowles, a current Director at North Carolina Life Insurance Co (annuity products are a competitor to Social Security and would almost certainly be beneficiaries of the partial privatization). Mr. Bowles' wife, Crandall Close Bowles, is on the Board of JP Morgan, and she is also on the "Business Council," a 27 member group whose members include Dick Fuld, Jeff Immelt, Jamie Dimon and a plethora of other Wall Streeters.
At the very least, these kinds of ties raise questions in regard to proposals for dealing with Social Security. Many members of the Commission stand to become clear direct and indirect beneficiaries of the privatization that the President is now warning against. It's disappointing that these ties have not been fully explored by the press, and it is extraordinary that the President would exhibit such political tone deafness in making these kinds of appointments. It tends to undercut the message of his last radio address.
I'll leave aside the nonsensical arguments in regard to Social Security's "solvency," because Professor Stephanie Kelton has dealt with them conclusively here. The only point I would add is in regard to the alleged issue of deficit spending today burdening our grandchildren. In reality, we will be leaving our grandchildren with government bonds that are net financial assets and wealth for them. As Randy Wray and Yeva Nersisyan have recently argued, even if government decides to raise taxes in, say, 2050 to retire the bonds (for whatever reason), the extra taxes are matched by payments made directly to bondholders in 2050. We can question the wisdom of whether it is right to make this political argument in favor of bond holders over tax payers. But it is a decision to be made at that time (not before) by future generations as to whether they should raise taxes by an amount equal to those interest payments, or by a greater amount to equal retirement of debt.
In the meantime, President Obama's approval ratings continue to plummet. His scaremongering has little credibility, given the disparity between his rhetoric and his actual policies. At the risk of further upsetting Robert Gibbs, we'll try to explain why Obama isn't finding stronger support from his base despite having passed, for instance, a health care bill, a fiscal stimulus bill and a financial regulation bill. For a start, follow the money: with the President and leading Democrats having taken the most campaign dollars from corporate interests those bills purport to challenge, and having gutted the most progressive elements in the bills themselves (see Matt Taibbi's latest as a perfect illustration of the phenomenon), it is clear that those signature pieces of legislation do not fundamentally challenge the structure of power at a time when that's what Americans most want. The only "change" most Americans might experience is a reduction in their Social Security benefits from a President currently presiding over one of the most regressive wealth transfers in history. They'll be receiving nothing but pocket change if a serious attack on entitlements is legitimized by this commission. A scaremongering radio address doesn't do a whole lot to change that or to alter the country's current economic trajectory. To paraphrase one of his leading political opponents, Mr. Obama would do well to stop practicing the cynical "politics as usual" that his Presidency was supposed to "refudiate".
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However, from where I'm sitting, Dean Baker has the most apropos headline of the week: "When Wall Street Rules, We Get Wall Street Rules."
So, will I be voting Democratic in November and then again in 2012? Ummm...yes, I will. But, if things keep moving forward as they are now, these will be some of the most underwhelming and unenthusiastic votes of my life.
Flame away...or, in the comments, link to your positive stories on the economy from the past week. (Or, do both!)