How Many More Stooges Should We Fire?

The loyal reader of this blog will be aware that earlier this week I posted an item calling for the firing of the 3 Stooges — Ben (Bernanke), Larry (Summers), and Curly Tim (Geithner).  With the Senate’s vote to confirm Ben Bernanke as Fed Chief for a second term, we lost the chance to rid ourselves of one of the Stooges, but it’s not too late to fire the other two I mentioned.

Meanwhile at mid-week I was struck by the media photos of Joe Biden and Nancy Pelosi looking over President Obama’s shoulder as he delivered his State of the Union speech, and the fact that at the risk of overusing the image of the Stooges, there are actually three more we should fire.  I found a variation of this thought in an excellent item by David Michael Green, who in one of the bleakest overviews of our situation I’ve seen — but one with which, unhappily, I must say I substantially agree — wrote that if “you like your politicians to be embarrassingly weak, inept and ineffectual, then the latter-day Three Stooges — Barack, Harry and Nancy — offer a refreshing break….”  A couple of my favorite lines from Prof. Green’s piece point out that the Democrats “have simply become a sort of halfway holiday from the worst excesses of the GOP, a kind of spring break from the serious business of wrecking a superpower.”  You can see David’s entire piece, “An Ugly Week for the Human Race and Other Living Things” — at http://www.smirkingchimp.com/print/26445.

But whoever you count as the contemporary Stooges, please bear in mind the real differences between the original Three Stooges and their counterparts in our current government.  Moe, Larry and Curly Joe gave a comic definition to the term “stooge.”  And unlike their latter-day counterparts in our government, they were entirely competent in their roles, and never did any harm.  This is much more than can be said for Ben, Larry, Curly Tim, Barack, Harry, Nancy or Joe.  None of these, as far as I’m concerned, is competent at representing the public interest, which is the role our system of government assigns to them.  But they’re entirely competent at representing the interests of their masters, primarily the big players in the financial, energy, pharmaceutical, and insurance industries.  So the definition of “stooge” that applies to them is “one who plays a subordinate or compliant role to a principal” – “principal” meaning one who calls the shots.  “Puppet” means the same thing, and one dictionary even gives, to illustrate the definition of “stooging,” “congressmen who stooge for the oil and mineral interests.”  This is the sense in which our current crew are stooges through and through.  And unfortunately, though at times one has to laugh to keep from crying, this is no laughing matter.

Fix the Economy and Get Wall Street Under Control: Start By Firing the Three Stooges

Thanks to A New Way Forward for posting this piece at http://www.anewwayforward.org/blogs/ today.

Fix the Economy and Get Wall Street Under Control: Start by Firing the Three Stooges, Ben, Larry and Curly Tim

The Three Stooges – Moe, Larry and Curly Joe – gave a comic definition to the term “stooge.”  But one of the dictionary definitions of “stooge” is “one who plays a subordinate or compliant role to a principal” – “principal” meaning one who calls the shots.  “Puppet” is said to mean the same thing.  The dictionary I’m looking at even gives, to illustrate the definition of “stooging,” “congressmen who stooge for the oil and mineral interests.”  So how apt is the use of the term for Ben, Larry and Curly Tim – Federal Reserve Chair Ben Bernanke, Larry Summers, director of the National Economic Council, the White House office that coördinates economic policy in the Obama Administration, and Treasury Secretary Tim Geithner?

In a general way, all three are stooges for Wall Street, in that their reaction to the near-collapse of the financial system that nearly brought us a Second Great Depression – and still could, in my view – has been to try to revive the institutions and practices that gave rise to the problem in the first place.  In short, they have been representing financial interests, rather than Main Street.  More specifically, Ben Bernanke supported and now continues the low-interest policies that helped inflate the Bubble Economy, enabled widespread fraud by failing to exercise the Fed’s regulatory powers while the Bubble was inflating, and has arranged trillions in backing for the credit markets, making more billions for Wall Street at the expense of the rest of us.  And it seems entirely fair to give Larry Summers, as the chief advisor to the White House on economic policy, an ample helping of blame for Obama’s failure to fight for a more substantial jobs program.  And there is evidence Tim Geithner arranged for a secret bailout of AIG when he was chairman of the New York Fed.  Others have made the case in more detail – see, for example, Chris Hedges, “Wall Street Will Be Back For More” and the other sources cited below – but I think it’s clear the terms are apt, and a useful way to draw attention to the need for President Obama not only to do an about-face on the subject of financial regulatory reform, but to clean the White House of the influence of those who have until now served as stooges for Wall Street while occupying positions of public authority and trust.  And a good start would be firing Ben, Larry and Curly Tim.

Perhaps in desperation after the Democrats’ loss in Massachusetts, President Obama has finally come out swinging at Wall Street.  Previous “reform” efforts were a smokescreen, but there is potential for real change in the latest proposals.  Those should be evaluated against our own program for fundamental restructuring of the financial system and the economy, and as their impact is complex and they will surely change, I don’t propose to evaluate them fully here.  Suffice it to say that in adopting the proposals of former Fed Chief Paul Volcker, Obama may have taken a page directly out of the playbook outlined by Simon Johnson a few days previous.  But as the dust flies and may not settle for some time, there are some things we can and should do to impact the situation.  This article outlines some of those first steps and provides a toolkit of information resources for following the action.

First, Obama should conduct a clean sweep, and divest his administration of those who produced the near collapse of the financial system and the economy and have thus far been working to preserve the pre-crisis status quo.  That means dumping the Three Stooges who laid so much of the groundwork for the recent near collapse of the economy and have worked ever since to preserve in its current form the financial system that caused it:  Amid the talk of possibly replacing Bernanke at the Fed, Summers’ name has been floated as an alternative.  That would be a change we could believe in – from the frying pan to the fire, or vice versa, take your pick.  Instead, progressive forces should mobilize behind figures like FDIC Chair Sheila Bair or economists like Joseph Steiglitz or James K. Galbraith.  And the few Senators who have thus far announced opposition to Bernanke’s reappointment – Oregon’s Jeff Merkley, Wisconsin’s Russ Feingold, and California’s Barbara Boxer – should hear from us in support, and the rest should hear from us in protest until they change their tune.

Second, something constructive should come out of the hearings of the Financial Crisis Inquiry Commission.  Thus far, we’ve seen softball questions lobbed at the giants of the finance industry on heavily reported Day One, while the media all but ignored the second day, at which Sheila Bair and Illinois Attorney General Lisa Madigan, among others, systematically described the ways in which the Fed helped enable the rampant fraud that led to the crisis and proposed serious steps to avoid a repetition.

Third, we should understand generally Wall Street’s program at this point – so we can oppose it – and devise and promote specific steps toward genuine and effective reform.  Ms. Bair’s testimony before the Commission is a wonderful resource for this purpose, and in reviewing it, we should also recognize that the People have a genuine champion in Sheila Bair.  Ms. Bair deserves our thanks, praise and support for taking on the – literally – Old Boys network who have empowered Wall Street’s fraud machine and are working to preserve it.

I published last May a comprehensive assessment of the financial and economic crisis, and a set of proposals for restructuring the economy.  Nothing in my assessment has changed, and I suggest it to your attention as a starting point if you want one.  Fast-forwarding to the present, possibly the best short resource I’m aware of on the background to the current situation and how it is evolving is Michael Hudson’s “The Revelations of Sheila Bair: Wall Street’s Power Grab (CounterPunch, January 19, 2010).

There are some straightforward proposals, already on our table if not Wall Street’s, that we should keep sight of and continue to mobilize behind.  Wall Street’s program provides a sort of mirror image of what they are and ought to be.  First, the Old Boys want to be allowed to continue to gamble with other people’s money and the financial system as a whole, and they want the financial sector to stay as it is even though it is already too big a part of the overall economy and is full of institutions whose practices continue to pose systemic risk.  Second, they want the proposed new Consumer Financial Protection Agency to be dumped.  Third, they want to avoid any structural reforms like reenactment of Glass-Steagall.  And of course, they want their own Three Stooges – Ben, Larry and Curly Tim – to remain in charge at the Fed, the Treasury, and the White House.  So if they lost Bernanke at the Fed, for example, they’d want to replace him with Larry Summers.  Flip those coins and we have the beginnings of our own program.

First, the big banks should be broken up.  Too big to fail means too big to be allowed to exist.  However, the financial system has evolved so that there are now institutions other than banks whose failure can pose systemic threats.  That’s one reason Obama’s proposals are more complex than the old Glass-Steagall firewall between commercial and investment banking.  There should be limits on the size of financial institutions.  But just as importantly, any institution engaged in financial activity should be required to hold sufficient reserves to cover its deposits if it takes them, and its bets if it makes them.  Simon Johnson recommends tripling capital requirements so banks hold at least 20-25 percent of their assets in core capital.  Peter Boone and Simon Johnson, “A bank levy will not stop the doomsday cycle,” Financial Times, January 19, 2010.  If implemented, such a requirement would make it more expensive for financial entities to expand beyond their usefulness or to pose systemic risk by making bets they couldn’t cover.  Of course, such a rule would have to be vigorously enforced, and that would require a regulator with integrity as well as authority.

Another key proposal is creation of a Consumer Financial Protection Agency.  On the need for it, see “Elizabeth Warren: Pass A Consumer Protection Agency Or Forget Regulatory Reform,” and Michael Hudson’s article including his report of Sheila Bair’s testimony.  In the meantime, Connecticut Senator Chris Dodd, who has floated the idea of dumping such an entity or burying it in another agency in order to obtain, excuse the expression, bipartisan support, should hear from his constituents by all available means.

And the financial sector itself should be reduced in size to the point where it can serve the needs of the economy without putting it at risk.  As Ms. Bair pointed out, “our financial sector has grown disproportionately in relation to the rest of our economy,” from “less than 15 percent of total US corporate profits in the 1950s and 1960s…to 25 percent in the 199s and 34 percent in the most recent decade through 2008.”  While financial services are “essential to our modern economy, the excesses of the last decade” represent “a costly diversion of resources from other sectors of the economy.”  In other words, what is spent on financial services is not available for investment in plant, equipment, research and development, training, or the production of goods, services and jobs outside the financial sector.

As the battles that have now been joined proceed, I’d suggest, among many excellent resources, those listed below, and the ongoing commentary of Simon Johnson, Michael Hudson, Mike Whitney (often posted on the website of CounterPunch, and others whose work appears here and on the home page of Progressive Democrats of America).

Robert Roth is a retired public interest lawyer who prosecuted marketplace fraud for the Attorneys General of New York and Oregon.

Other valuable reads from Robert:

Dan Geldon, http://baselinescenario.com/2010/01/20/how-supposed-free-market-theorists-destroyed-free-market-theory/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BaselineScenario+%28The+Baseline+Scenario%29″>“How Supposed Free-Market Theorists Destroyed Free-Market Theory”

Robert Roth, “Fixing the Economy: For Starters, Fed Chief Ben Bernanke Should Not Be Re-Appointed”

Tagged with: Bernanke • break up the banks • Geithner • glass-steagall • Obama • the fed • three stooges • too-big-to-fail • Treasury

Fascism in the United States? or just increasing alienation and possible chaos?

My analysis of the financial and economic crises and proposals to address them started as an effort to show the need for a second federal stimulus package, both to prevent draconian cuts in state and local government budgets and to prevent renewed freefall in the economy. But I’m afraid the US and global economies may be down for the count. If that’s true, many more people here and around the world will ultimately become destitute, and desperate.  And as it becomes clear that we’re in a Second Great (or perhaps an even Greater) Depression, as people move from discouragement to despair, as it becomes clear that the “American way of life” is not going to last much longer and won’t be coming back, we could have, gradually or not so gradually, increasing violence and a descent into chaos.  Against that scenario, my proposals are also an effort to buy time, in the hope that by stretching out the collapse of the economy and increasing understanding of what is happening, we might enable more people to learn to cope with changing circumstances effectively and in time to save both civility and lives. My hope is that we might thus hold together, build community, and transition peacefully to a sustainable and survivable future.

Recent events have led me to wonder if we might already be seeing signs of the chaos I’m hoping we can avoid. There’s an interesting discussion going on at http://www.ourfuture.org/blog-entry/2009083205/fascist-america-are-we-there-yet (Campaign for America’s Future) around some articles by Sara Robinson titled “Fascism in America: Are We There Yet?” and “Fascism II.” In the second installment, Sara discusses the disruptions at Congressional “town hall” meetings as possible practice for and preludes to “goon squad” activity – the intimidation of dissenters and anyone beyond the pale of the “goon squad” culture – and suggests means of resistance to prevent the disruptions from growing into such a threat. She promises in the third installment to outline her recommendations for a broader range of activities to head off fascism in the US on a more long-term basis. She says her readers’ reactions tend to be either disbelieving (“It can’t happen here and certainly hasn’t started to”), dismissive of her naiveté (“of course it’s been here for some time”), or grateful for her having raised the issue and interested in discussing it. I’m in that third category.

Much of the commentary on Sara’s articles and her responses are worth checking out if the issue interests you. I intend here to draft some commentary of my own, which I will also copy and submit as commentary on Sara’s articles at the Campaign for America’s Future blog.

The threat of fascism in the US has concerned me at least since the days of the Nixon administration. But I’ve always been a little unclear as to exactly what the implementation of fascism here would involve. The current discussion helps to clarify that, and leaves me a little unsure it matters whether we call the problem fascism or not. What is worrisome is the prospect of suppression of dissent and the growth of an atmosphere of fear and intimidation, in which people are afraid to express dissenting views on either cultural or political matters. If that happens on a national scale and obtains government backing and enforcement, I supposed that’s fascism. That may be overly simple but I’m going with it for purposes of this discussion. On that basis, I have a number of observations to make that do not focus on whether fascism is here or on the horizon, but on the suppression of dissent and how an atmosphere of fear and intimidation could develop.

First, it does seem that disruptive and sometimes threatening behavior at the “town meetings” could be harbingers of tomorrow’s goon squads. I don’t say they are, but they could be, in the sense that at least some of the disrupters are or could become threatening, and as Sara says, like any bully if allowed to succeed they could become worse – more numerous, organized, and aggressive.

Just as clearly, some of the disruptive behavior comes from people who are fed up with Washington and government on many levels, including the Wall Street bailouts. In other words, there may be some xenophobes, some relatively malevolent people, involved, but that doesn’t seem to constitute everyone. There are people protesting who are doing so spontaneously and independently of outside or centralized influence, for reasons that are personal and perhaps not antisocial or potentially violent. We’re all being lied to and robbed, and some of the rage is a response to such more generalized grievances. For a sympathetic treatment of the widespread distrust of government and some of the reasons for it, see Alexander Cockburn’s “Health Plans and Death Plans” at www.counterpunch.org, August 14-16, 2009.

On the other hand, however spontaneously and independently many individuals may be acting, a large share of the “acting out” at these events is, if not orchestrated, clearly encouraged by others with a national perspective and agenda. An article in the Financial Times (8/16/09, p. 2) quoted Dick Armey, for example, as advising people to express their dissent with the tactics developed by Saul Alinsky. (You can access at least a few Financial Times articles free at ft.com before they ask you to subscribe for further access.)

These attacks are in part a continuation of the attacks on the Clinton administration, and constitute an attempt by some to weaken and ultimately destroy the Obama (or any Democratic) administration. So long as the Democrats are in power, these people will express their dissent destructively, refusing to compromise or work within the system in that sense. It should be remembered in this connection that there is considerable continuity of personnel from the Nixon administration through Reagan and the two Bush regimes, a substantial cadre of individuals whose agenda is to suppress dissent and grow the empire, the imperial presidency, and with them the national security state. The earlier lineage of these folks goes back to President Truman’s decision to “scare hell out of the American people” to obtain support for maintaining the military rather than disarming at the end of World War II, while government planning documents from that period show an explicit intent to dominate the world for the purpose of continuing to control the disproportionate share of the world’s resources being utilized by the US. See, for example, Policy Planning Study 23, published by State Department planning staff, written by George Kennan in February 1948 (“We have about 50% of the world’s wealth but only 6.3% of its population. … Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity.”)

Truman’s agenda laid the groundwork for the McCarthy era and the Red Scare of the 1950s. Richard Hofstadter, in The Paranoid Style in American Politics, theorized that as a relatively rootless society, America is peculiarly fertile ground for anyone suffering from economic or status anxiety to become susceptible to the politics of scapegoating.

The prevalence of economic and status anxiety in the US today can hardly be exaggerated. On Hofstadter’s theory, this would lead large numbers of people to become susceptible to the politics of scapegoating. Unfortunately, there are thought and opinion leaders aplenty who are only too quick and glad to encourage that tendency, and the scapegoating has begun.

It should be borne in mind, by the way, that suppression of dissent is a current reality, not just a future threat, for some whose views deviate from the mainstream or who express their dissent in certain ways and who are in vulnerable positions. Speaking of vulnerable positions, a great many people, who have already been scapegoated for years, experience the US right now as a police state in which arbitrary raids, detention, separation from family, and deportation are immediate threats. Not to mention Guantanamo.

Mike Whitney has also pointed out that enormous transfers of wealth from taxpayers to Wall Street continue to take place. See his “There Is No Recession: It’s A Planned Demolition,” at http://www.counterpunch.org/whitney08102009.html. It could be that elite elements are opportunistically encouraging disruptions to distract attention from the ongoing heist.

Finally, and frankly of most concern to me, there are larger problems on the horizon that may exacerbate the most destructive tendencies currently on display. With the onset of problems arising from peak oil and other resource shortages, the frustration of the culture and lifestyle based on motor vehicles and suburbia, the high likelihood the recession and with it, unemployment will persist or worsen – and unemployment is already at staggering levels – how will people react? The prospect of current systems of social and economic support breaking down makes plausible any number of unpleasant scenarios, including an increase in antisocial conduct and violence. Thus the immediate threat may not be so much fascism as spontaneous social and economic unrest leading to chaos and violence – though in that case, perhaps fascism would not be far behind.

Momentum for a second stimulus, & manure for the US economy

I first latched on to the idea of a second federal stimulus when I was preparing testimony to the Oregon Legislature, trying to avoid funding and services cuts to vulnerable people.   I proposed some progressive tax increases, but those were not enough, and Robert Reich had calculated that state budget cuts and tax increases were already projected to total $350bn, enough to negate nearly half of the first stimulus.  So I joined Mr. Reich, Paul Krugman, and James K. Galbraith in calling for an additional federal stimulus.  At the time the idea was eminently sensible and reasonable but like many such ideas, was almost too far out to propose without people rolling their eyes.

In just the ten weeks since, the idea, still as sensible as ever, has nevertheless entered the mainstream of public discourse.  I commented on that fact, and outlined the need for a restructured economy, in a letter today to the Financial Times, the pre-eminent financial newspaper (it’s much more useful and informative than the Wall Street Journal, and Obama says he’s been reading it for 20 years).  Here’s the letter, which I hope speaks well enough for itself:

Sir,

Progressive Democrats of America went on record in support of a second stimulus with its May 18, 2009 publication of my assessment of the financial and economic crisis and a plan to address it.  The idea was not original — I got it from Robert Reich, and Paul Krugman and James K. Galbraith also supported it — but it was hardly part of mainstream discussion, despite Reich’s calculation that a projected $350bn in State budget cuts and tax hikes would predictably negate nearly half the impact of the $787bn first federal stimulus.

In less than two months, that snowball has become at least a small avalanche:  on June 29^th, the FT reported that Christina Romer, chair of the White House Council of Economic Advisers, had said the administration would be open to further stimulus if needed, acknowledging that cutbacks by states facing budget crises would push in the opposite direction.  Laura Tyson of the president’s Economic Recovery Advisory Board came out in favor the following week.  But my jaw actually slackened a bit when I realized the July 11-12, 2009 FT editorial I was reading called for a second stimulus, specifically targeting the states on condition the money be spent quickly.

A second stimulus is critical as a holding action, to keep us from going over the cliff.  As Aline van Duyn notes (also July 11-12, 2009), alluding to Nouriel Roubini’s recent analysis, “green shoots” have been replaced in the discussion by talk of weeds that may, in the case of the US economy, turn to manure.  Obama should recognize and level with the public about the dimensions and severity of the problem, and return to Congress for a second stimulus to help the states maintain vital services and avoid tax increases, and Congress should heed the request.

But if we are to pull back any substantial distance from that cliff and begin to grow our economy, it must be done sustainably, and here I think the metaphor of manure in its positive meaning, as a fertilizing substance that replenishes and nourishes the soil, is useful.  The US economy isn’t a car in running condition that just needs a jump start to resume operations, it’s a field of depleted soil that needs a whole range of remedial measures, so that when we’re done with stimuli the debt we’ve incurred has not just ameliorated the effects of the crisis but encouraged the emergence and growth of real green shoots with a future.

Of course we need the capacity to generate and sustain sufficient aggregate demand.  Since wages have stagnated for roughly thirty years, the demand that sustained the world economy till recently came from US consumer debt.  That source cannot be revived both for arithmetic and psychological reasons:  People can’t afford to borrow more, and they’re understandably afraid to.  So we need debt relief as well as more and better jobs at higher wages.  Hence the roots of the problem must be addressed, including the obscene concentration of wealth that has left US households without money to spend, and the so-called trade agreements that have offshored and outsourced much of the US manufacturing sector.  We should facilitate rather than hamper labor organizing, through such measures as the Employee Free Choice Act, and revisit the trade agreements, through such legislation as the Trade Reform, Accountability, Development and Employment (TRADE) Act, to be introduced in this session of Congress by Senator Sherrod Brown (D-OH) and Rep. Mike Michaud (D-ME).

We of course also need repaired and improved infrastructure, with the emphasis on energy conservation, mass transit and renewable sources, as well as education to prepare workers for the jobs of the future, and a universal healthcare system to enable U.S. firms to be viable and compete.

However, when the U.S. and Western economies have recovered from past recessions, as well as the Great Depression, they had at their disposal – and have now substantially disposed of – the resources of the natural world – including not only cheap oil but also abundant land, air and water – to resume operations. With natural resources now considerably more expensive and the continued operation of the Old Economy threatening the means of life (e.g., overfishing the oceans) and the biosphere itself (e.g., arable land, breathable air, drinkable water), the creation of more jobs at higher wages will require a complex process of reconstructing an economy as if people and the Earth mattered. We need something – indeed many things – to be substantially different, including, for example, the means of producing food by sustainable agricultural practices, with less chemically dependent agribusiness and much more locally based, smaller-scale and sustainable farming.

How to pay for all this, and save the dollar to boot?  We might start by recovering the ill-gotten gains of those who apparently caused or contributed to the crisis through fraud.  In the wake of what appears to have been far and away the biggest financial scam in the history of the world, nobody but pikers like Bernie Madoff has even been investigated.  A tax on financial transactions would also help.  So would cessation of our foreign military adventures deceptively marketed as the “war on terror,” or whatever our current wars come to be called, now shifting from Iraq to Afghanistan and Pakistan. These have been an enormous waste of resources as well as human lives, as a substantial consensus among knowledgeable analysts finds – as was predicted – that the result has been an increase in terrorism. Another increasingly glaring fact about these wars is that we just can’t afford them anymore. We’re waging them on credit, and increasingly on credit from foreigners. And – besides the appalling and immoral loss of human life, an immeasurable cost – the resources wasted on these destructive activities are wholly unproductive economically, as well as needed elsewhere.

Much or all of this is of course anathema to US elites.  But these civilizing measures are essential if the US is to avoid becoming a Third World country beset by disillusionment with public institutions, social unrest, and possibly violence on a grand scale, and instead emerge from the present crisis in substantially different but still civilized form.

These and related suggestions are developed in greater detail at http://pdamerica.org/articles/news/2009-05-18-10-29-00-news.php and on my own blog at http://healingjustice.wordpress.com/.  Another useful summation of much of the foregoing is E. F. Schumacher’s Small Is Beautiful (recommended by Harry Eyres, January 31 and in Mr Don Cropper’s letter, July 11-12, 2009).

Cordially,

Robert Roth

The Financial and Economic Crisis: Analysis & Action Plan

The article I have posted as a Page under this title was posted on the website of Progressive Democrats of America on May 18, 2009.  I began writing it as testimony to the Ways & Means Committee of the Oregon Legislature for hearings on how to handle the Oregon budget crisis.  I was primarily concerned about prospective losses of funds and services for people  with mental and developmental disabilities and other vulnerable people, but just about everyone who testified at that hearing in Eugene told of other worthy and crying needs that would be denied if the Legislature cut off funding.  I decided the most constructive thing I could do was suggest sources of funding.  After reviewing the recent reports of the Oregon Center for Public Policy, I wrote testimony in favor of a new tax on individuals with $250,000 or more in annual income and on profitable corporations.  But in addition, I suggested the Legislature ask the Congressional Delegation to seek additional federal stimulus money.

Much as the idea of more federal stimulus seemed unlikely — with the Republicans already attacking the stimulus that had been passed — the justification for it is quite reasonable:  The federal stimulus amounted to $787 billion to stimulate economic activity by creating jobs and funding needed services.  State budget cuts and tax increases were (and still are as far as I know) projected to be about $350 billion.  So nearly half of the first federal stimulus would be negated, undone, by those State actions.  Thus we would need more federal stimulus just to get the effect the first package was designed to deliver.

I got the idea for more federal stimulus targeting the States from Robert Reich.  It was also favored by economists Paul Krugman and James K. Galbraith, Jr.  But at that point it was just them, and me, and Progressive Democrats of America on record in favor of it.  However, the idea may be beginning to catch on.

Last week, Christina Romer, chair of the White House Council of Economic Advisers, acknowledged in an interview with the Financial Times that cutbacks by states facing budget crises would push in the opposite direction from the federal stimulus.  Meanwhile David Axelrod, a senior White House adviser, told NBC Television the administration would be open to more stimulus if it turned out to be needed.  These and related remarks are reported in the Financial Times of 6/29/09.

The idea for more federal stimulus, and the other policy proposals in my article for PDA, are intended to buy time for the transition to what I think will be a new economy.  The pessimism of my assessment of the economy back in mid-May seems to have held up so far, and there’s at least a strong chance the economy will resist the “jump start” the federal stimulus is intended to provide.  As unemployment continues to grow and more people become increasingly desperate, I’m afraid we may face a period of social and political unrest that may even degenerate into chaos and violence.   Our leaders, including President Obama, are doing nothing to prepare us for the worst case scenario that has at least a strong chance of coming to pass.  So the spirit of my “Action Plan” on the financial & economic crisis is really to make the transition to a lower living standard more gradual, and lay some groundwork for a transition to a more sustainable economy.

On a more fundamental level, we need an approach that is best described for me, so far, by Robert Jensen in his new book, “All My Bones Shake,” about seeking the prophetic voices we need to find and use in the times ahead — starting now.  I’m just beginning the book, but have read three excerpts posted in various places.  I’ll speak of them further in a later post.