A thoughtful man – Harold Meyerson…
As the nation navigates through the most perilous straits it has seen since the 1930s, policymakers are looking back to the ’30s to see which of the paths that Depression-era America embarked upon actually led toward recovery. Well, some of our policymakers. Others, it seems, have seized upon the very policies that deepened the Depression and are repackaging them as solutions for our time.
In Monday’s meeting between President-elect Barack Obama and congressional leaders, Senate Republican leader Mitch McConnell suggested that instead of providing aid to the states to help them meet their Medicaid and education obligations, the federal government offer them loans. The idea is ridiculous on its face: With revenue drying up, states are already slashing services and reducing their workforces, which only deepens the downturn. The last thing they’d be inclined to do would be to take on more debt at the very moment they’re struggling to balance their budgets.
But back to my original point: This idea was tried once before, in the depths of the Depression. In 1932, Congress appropriated $300 million to the Reconstruction Finance Corporation to send to the states for unemployment relief… Unfortunately, Herbert Hoover’s RFC didn’t offer the funds to the states as grants but as loans. Already all-but-insolvent, many states didn’t take the offer. And the economy continued its plunge into the abyss.
This is Mitch McConnell’s idea of a policy worth reviving.
It’s not just Mitch McConnell, it’s the whole Republican Party. They have a whole set of sound bytes about small government, fiscal responsibility, and Conservative values that sit behind everything they say, but they’re applied at exactly the wrong times. It’s not lost on many of us that their reign has lead us where we are today. They’re like a bunch of little kids who’ve trashed the house, and are then telling you you’re not cleaning it up right. Many say, "we didn’t do this." The truth is that "this" is what happens when you "don’t do anything," which is what they did – nothing. Now McConnell wants to pass the problem to the States. The States have no resources nor any way to conjure up any resources – present or future. That why we "United" some time back.
Such historical illiteracy can result not only in cures that kill the patient but is also a cause of our current crisis. In Sunday’s New York Times magazine, economics columnist Joe Nocera reported on the intricate mathematical models that Wall Street banks and brokerages used to assess their exposure to risk – models, it’s now painfully clear, that failed to alert our financial titans that they were parading off a cliff. Devised by the quants (Wall Street’s name for the gifted mathematicians it employed), the models factored in an immense number of variables, including market behavior going back a quarter-century, in coming up with daily quantifications of risk.
But in addition to all their quants, Wall Street should have hired a handful of hists (my version of Wall Streetese for economic historians). Those hists might have insisted that the risk models include data from the late 1920s, the last time that America’s financial institutions were as highly leveraged and as lightly regulated as they were last year. Those hists might have noted that even as U.S. households bought more and more on credit, their median annual income had flat-lined ($50,557 in 2000, $50,233 in 2007) and that this was a story that could only end badly — much as it did at the end of the ’20s, when the purchasing power of American farmers and workers tanked…
It is not lost on us that Mathematical Models that are "including market behavior going back a quarter-century, in coming up with daily quantifications of risk" very specifically include only a particular piece of history – the period since 1983 [2008 – 25 = 1983].Reagan was inaugurated in 1981. He immediately cut taxes on the wealthy, began the process of deregulation, and ran the country with deficit spending massively escalating the National debt. So, the Market behavior used in these models was a Bull Market supported in part by Reagan’s irresponsible fiscal governance and kept alive by the "fixer," Alan Greenspan who he appointed in 1987. Reagan was a clone of Calvin Coolidge who shepherded the Roaring twenties that lead to the Great Depression:
One of Republican Ronald Reagan’s first acts upon entering the White House in 1981 was to display a portrait of Calvin Coolidge. Reagan’s act of devotion to a relatively obscure Republican president of the 1920s puzzled many observers. Most perplexing was the fact that Reagan, the amiable former Hollywood actor known as the “Great Communicator,” seemed to share little with “Silent Cal,” the taciturn, puritanical New Englander. But President Reagan’s act of devotion was fraught with symbolism. It revealed his longing to return to Calvin Coolidge’s conservative America—a nation characterized by Republican-controlled politics, nativist-dominated society, traditionalist cultural values, limited federal government, and an economy governed by corporate executives and financiers. (Michael Schaller and George Rising, The Republican Ascendancy: American Politics, 1968-2001 [Wheeling, IL: Harlan Davidson, 2002], 1)
Wall Streets risk assessment computers might as well have used "The Roaring Twenties" Market figures in their models, because those computers lead us to the same outcome as Coolidge’s policies – a massive crash. Our best science fiction movies make their box office proceeds from machines that have been fed false assumptions – I Robot, 2001: A Space Odyssey, The Terminator, The Matrix…
The one great period of broadly shared prosperity in U.S. history remains the three decades following World War II, which, anything but coincidentally, is the one period in which America had high levels of unionization. The business lobby is throwing big money into ads opposing the Employee Free Choice Act (EFCA), which would make it easier for workers to join unions, but one concern it has neglected to address is how the United States can again become a land of broad-based affluence with private-sector unionization at its current 7 percent level. There is no historic precedent for mass prosperity absent mass collective bargaining. The model cannot be constructed.
One of the biggest thing we haven’t heard much about recently is the topic Meyerson brings up with this comment – the plight of the worker. Pension Plans, Befefits, Job Security, Unions,etc. The Reaganization of America essentially put the worker out to pasture. In a million different ways, Companies cut costs and increased profits by cutting employee benefits, cutting employees, "outsourcing jobs" overseas. Why there haven’t been riots in the streets amazes me. I think a lot of it came from bumping people up into office jobs – which is now our problem. Those are going away lickety-split. The problem of "privatizing" is that the "privates" can fail, shut down, etc. Shutting down the Labor Movement is where a lot of the business profit has been generated.
Happily, Barack Obama seems to have learned the right lessons from America’s economic history. He knows that the stimulus package needs to be big enough to compensate for the collapse of bank lending. He knows that unemployment insurance and food stamps cannot be allowed to run out. He supports the EFCA as a way to boost Americans’ incomes.
The problem is that a number of powerful members of Congress aren’t much more historically literate than McConnell. Some Republicans advocate time-honored business tax breaks that have never done anything to jump-start the economy; some Democrats fail to see how EFCA can renew their party’s historical role as the expander of the middle class (or they fear a diminution of business campaign contributions in 2010). From the world’s best bully pulpit, Obama needs to preach, and teach, some history.
I wish that Meyerson were right that historical education would make a difference. He’s not. History doesn’t repeat itself because people haven’t read the history books. History repeats itself because people get something, at least for a time, by making the same damn mistakes over and over. It took the Republican businessman machine decades to dismantle the history we put in place to protect our economy and our middle class. It’s how they generated their prosperity. Putting those safeguards back in place is going to be just as hard as it was last time, maybe even harder [if Obama doesn’t block the outsourcing of jobs overseas].
No one wants to say it, but this is a Class War – one we’ve fought before. It’s the middle class versus the financial elite class, just like it has always been. Any fantasy that the Business Community and Wall Street are going to help out is just a waste of time. They’ve got problems of their own. Any fantasy that their Republican Representatives are going to help us out is just day-dreaming. They’ve got problems of their own too. Let the battle begin…
It’s proven over and over that free markets and private enterprise, without at least reasonable regulation, lead to a widening income gap and class division. We need to be honest about that and force those who advocate it to admit that that is what they’re trying to bring about.
We’re now seeing the same thing in the health care industry (and I for one regret that health care has become “an industry” and that “business” dominates doctoring). We’re on the verge of separating health care from job benefits, as more and more employers cut back on insurance coverage for their employees. The only answer is for government to take it over — and I, for one, favor that in some fashion, like a single-payer, universal care system.
But along with that, the privatization/ free enterprise mavens should have to admit that they failed.
I was delighted that I changed Specialties when I did. As an Internist, I just wouldn’t have been able to become “industrialized.” I might have gone to that Zen Monastery that was part of my fantasy life as a young man. I could have lived with being the modest income doctor of my childhood or a salaried cog in a socialized medicine wheel, but I couldn’t have made it as a businessman-doctor, part of the health care industry. Our profession allowed me to live on the outskirts of all of that, which is the only place I could have survived.
As for privatization, it conflicts with my rule for living: “Never accept an invitation to go crazy.”