I am not kidding...
Unemployment, by the old method of calculation, has already topped 14%. By early next year, it will be above 18%. 5 million people will start to run out of unemployment benefits. Mortgage defaults are accelerating and are now joined by defaults in other kinds of consumer debt while real estate prices continue to fall, credit remains frozen and interest rates refuse to fall despite a 1% prime rate. Meanwhile, retirement accounts have been nearly halved by the current crisis and upwards of 12 million people have no way to retire at all under the current conditions.
In response, one of the most amazing resurrections in modern history is taking place. Keynes is back. Shot, stabbed, burned, choked, hung, electrified and drawn and quartered... finely diced into a thousand pieces and buried at a thousand different grave plots... exorcised more thoroughly than old Rasputin himself... yet, the old carcass RISES, little worse for the wear... and this overnight, literally at the first
hint of trouble in the freedom-loving-freedom-giving-free-as-heck markets.
Not to worry. In the interim, the new government of "Hope" is being assembled. The realities of politics require that it govern from the “center” (just as those same realities required that it talk from the “center”, and primary from the “center”, and run for election from the “center”). Nevertheless, the “economics” of the University of Chicago are left behind, along with Reverend Wright. The new government will be
“center” Keynesian: competent regulation of the Bush bailouts, the extension of the bailouts to the auto industry (and, perhaps others), a new “stimulus” package, extended unemployment benefits, and jaw-boning the Europeans.
Is that all?
Well, it is a “living” program and… The transition team nervously eyes the “real” Keynesians and the radical left.
Finally, finally, finally… the “real” Keynesians are heard from. The “Nobel” economist and neo-Keynesian, Joseph Stiglitz, writes a feature article for the November, 2008 issue of Vanity Fair, hardly an academic journal. The piece begins, “When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come. Virtually all the indicators look grim.”
Stiglitz then goes on to explain, in excruciating detail, the depth of the crisis and the indictment of the usual suspects responsible for it. By the time he gets to his prescription, the reader is expecting John Maynard himself to materialize. In a finale entitled, “What Is To Be Done”, the echoes, not just of Keynes, but of Dostoyevsky and Tolstoy and Cherneshevsky and even Lenin could be invoked.
Instead: “… there are ways of thoughtfully shaping policy that can walk a fine line and help us get out of our current predicament. Spending money on needed investments—infrastructure, education, technology—will yield double dividends. It will increase incomes today while laying the foundations for future employment and economic growth. Investments in energy efficiency will pay triple dividends—yielding environmental benefits in addition to the short- and long-run economic benefits.
The federal government needs to give a hand to states and localities—their tax revenues are plummeting, and without help they will face costly cutbacks in investment and in basic human services. The poor will suffer today, and growth will suffer tomorrow. The big advantage of a program to make up for the shortfall in the revenues of states and localities is that it would provide money in the amounts
needed: if the economy recovers quickly, the shortfall will be small; if the downturn is long, as I fear will be the case, the shortfall will be large.”
Of all of it, only “infrastructure” and state and local “investment” have any immediate impact at all, and that by way of a “trickle down” more obscure than Reagan could ever have dared. The Keynesian New New Deal is filling potholes?
What about CCC and NRA and FERA and RFC and AAA and PWA and TVA and an
Economic Bill of Rights? Come to think of it, forget all that. What about jobs, debt forgiveness, an end to evictions, nationalization of strategic industries, prosecution of economic criminals, guaranteed retirement accounts and the immediate elimination of two thirds of the defense budget?
The “Nobel” economist and neo-Keynesian, Paul Krugman, travels the circuit of all of the major news shows. The implicit criticism of the Obama administration is apparent. What is needed is not just an immediate stimulus but a “massive” one, as much as another $600 billion. Where should it go? “Infrastructure”, channeled primarily through Public Works projects stalled for lack of funding.
Pork plus potholes…
Naomi Klein at the Miami Book Fair. Economic reality filled the hall and shaped the conversation of shocking economic crisis. After the most radical criticism of the current powers that be, Klein turned to her proposals, to be achieved by pressuring the Obama administration. She stated categorically that every crisis was also an “opportunity”. She reported approvingly of the Gordon Brown Labor government who, through negotiating “pressure”, forced the bailout-needy British banks to pay a 10% dividend, versus the 5% that the corrupt U.S. treasury got from its petitioners. Anything else?
Pressure plus potholes…
Bernie Sanders, Teddy Kennedy, Thom Hartmann, John Kerry, Rachel Maddow, Russ Feingold, Henry Waxman, Warren Buffet, Randi Rhodes, Bill Richardson, John Conyers, Ralph Nader, Alan Grayson, Elizabeth Warren…
And that is it… all of it.