Nov 04, 2010
The real message from voters was "Fix this stinking economy." But Republicans have no intention of doing so.
With Republicans in control of the House, forget spending increases or tax cuts to stimulate the economy.
Republicans don't believe in stimulating economies. They think
markets eventually clear - once the pain is sufficient. Or in the
immortal words of Herbert Hoover's treasury secretary, millionaire
industrialist Andrew Mellon: "Liquidate labor, liquidate stocks,
liquidate the farmer, liquidate real estate. It will purge the
rottenness out of the system. People will work harder, lead a more moral
life."
Of course, Mellon was dead wrong. Nothing was purged. Instead, the economy sunk into deeper and deeper depression.
So how do we get out of this bog?
By default, all the responsibility is on the Federal Reserve - which
announced today (Wednesday) it will pump $600 billion into the economy
between now and June to reduce long-term interest rates ("quantitative
easing" in Fed-speak).
The Fed thinks lower long-term rates will (1) push more businesses to
expand capacity and hire workers; (2) push the dollar downward and make
American exports more competitive and therefore generate more jobs; and
(3) allow more Americans to refinance their homes at low rates, thereby
giving them more cash to spend and thereby stimulate more jobs.
But without an expansionary fiscal policy, the Fed's goals are pipe dreams.
Lower rates won't spur businesses to expand capacity and jobs because
there aren't enough consumers to buy additional goods and services.
Lower rates won't push down the dollar and spur more exports. They'll
only spur more competitive devaluations by other nations determined not
to lose export shares and jobs.
And lower rates won't allow middle-class and working-class Americans
to refinance their homes because banks won't lend to families whose
incomes have dropped, whose debts have risen, or who owe more on their
homes than the homes are worth. That is, most of us.
Without an expansive fiscal policy that puts more money into the
pockets of consumers and gets them out from under their huge debt load,
the Fed's billions will just fuel another stock-market bubble.
It's already started. Stocks are up even though the rest of the
economy is still down because money is already so cheap. Bondholders who
can't get much of any return from their loans are shifting into stocks.
Companies are buying back more shares of their own stock. And Wall
Street is making more bets in the stock market with money it can borrow
at almost zero percent interest.
In other words, with Republicans in charge of the House, the economy
remains anemic. It may even succumb to another bubble that bursts.
Could it be that Republicans want to keep the economy this way through Election Day, 2012?
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Robert Reich
Robert Reich, is the Chancellor's Professor of Public Policy at the University of California, Berkeley, and a senior fellow at the Blum Center for Developing Economies. He served as secretary of labor in the Clinton administration, for which Time magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. His book include: "Aftershock" (2011), "The Work of Nations" (1992), "Beyond Outrage" (2012) and, "Saving Capitalism" (2016). He is also a founding editor of The American Prospect magazine, former chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." Reich's newest book is "The Common Good" (2019). He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.
The real message from voters was "Fix this stinking economy." But Republicans have no intention of doing so.
With Republicans in control of the House, forget spending increases or tax cuts to stimulate the economy.
Republicans don't believe in stimulating economies. They think
markets eventually clear - once the pain is sufficient. Or in the
immortal words of Herbert Hoover's treasury secretary, millionaire
industrialist Andrew Mellon: "Liquidate labor, liquidate stocks,
liquidate the farmer, liquidate real estate. It will purge the
rottenness out of the system. People will work harder, lead a more moral
life."
Of course, Mellon was dead wrong. Nothing was purged. Instead, the economy sunk into deeper and deeper depression.
So how do we get out of this bog?
By default, all the responsibility is on the Federal Reserve - which
announced today (Wednesday) it will pump $600 billion into the economy
between now and June to reduce long-term interest rates ("quantitative
easing" in Fed-speak).
The Fed thinks lower long-term rates will (1) push more businesses to
expand capacity and hire workers; (2) push the dollar downward and make
American exports more competitive and therefore generate more jobs; and
(3) allow more Americans to refinance their homes at low rates, thereby
giving them more cash to spend and thereby stimulate more jobs.
But without an expansionary fiscal policy, the Fed's goals are pipe dreams.
Lower rates won't spur businesses to expand capacity and jobs because
there aren't enough consumers to buy additional goods and services.
Lower rates won't push down the dollar and spur more exports. They'll
only spur more competitive devaluations by other nations determined not
to lose export shares and jobs.
And lower rates won't allow middle-class and working-class Americans
to refinance their homes because banks won't lend to families whose
incomes have dropped, whose debts have risen, or who owe more on their
homes than the homes are worth. That is, most of us.
Without an expansive fiscal policy that puts more money into the
pockets of consumers and gets them out from under their huge debt load,
the Fed's billions will just fuel another stock-market bubble.
It's already started. Stocks are up even though the rest of the
economy is still down because money is already so cheap. Bondholders who
can't get much of any return from their loans are shifting into stocks.
Companies are buying back more shares of their own stock. And Wall
Street is making more bets in the stock market with money it can borrow
at almost zero percent interest.
In other words, with Republicans in charge of the House, the economy
remains anemic. It may even succumb to another bubble that bursts.
Could it be that Republicans want to keep the economy this way through Election Day, 2012?
Robert Reich
Robert Reich, is the Chancellor's Professor of Public Policy at the University of California, Berkeley, and a senior fellow at the Blum Center for Developing Economies. He served as secretary of labor in the Clinton administration, for which Time magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. His book include: "Aftershock" (2011), "The Work of Nations" (1992), "Beyond Outrage" (2012) and, "Saving Capitalism" (2016). He is also a founding editor of The American Prospect magazine, former chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." Reich's newest book is "The Common Good" (2019). He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.
The real message from voters was "Fix this stinking economy." But Republicans have no intention of doing so.
With Republicans in control of the House, forget spending increases or tax cuts to stimulate the economy.
Republicans don't believe in stimulating economies. They think
markets eventually clear - once the pain is sufficient. Or in the
immortal words of Herbert Hoover's treasury secretary, millionaire
industrialist Andrew Mellon: "Liquidate labor, liquidate stocks,
liquidate the farmer, liquidate real estate. It will purge the
rottenness out of the system. People will work harder, lead a more moral
life."
Of course, Mellon was dead wrong. Nothing was purged. Instead, the economy sunk into deeper and deeper depression.
So how do we get out of this bog?
By default, all the responsibility is on the Federal Reserve - which
announced today (Wednesday) it will pump $600 billion into the economy
between now and June to reduce long-term interest rates ("quantitative
easing" in Fed-speak).
The Fed thinks lower long-term rates will (1) push more businesses to
expand capacity and hire workers; (2) push the dollar downward and make
American exports more competitive and therefore generate more jobs; and
(3) allow more Americans to refinance their homes at low rates, thereby
giving them more cash to spend and thereby stimulate more jobs.
But without an expansionary fiscal policy, the Fed's goals are pipe dreams.
Lower rates won't spur businesses to expand capacity and jobs because
there aren't enough consumers to buy additional goods and services.
Lower rates won't push down the dollar and spur more exports. They'll
only spur more competitive devaluations by other nations determined not
to lose export shares and jobs.
And lower rates won't allow middle-class and working-class Americans
to refinance their homes because banks won't lend to families whose
incomes have dropped, whose debts have risen, or who owe more on their
homes than the homes are worth. That is, most of us.
Without an expansive fiscal policy that puts more money into the
pockets of consumers and gets them out from under their huge debt load,
the Fed's billions will just fuel another stock-market bubble.
It's already started. Stocks are up even though the rest of the
economy is still down because money is already so cheap. Bondholders who
can't get much of any return from their loans are shifting into stocks.
Companies are buying back more shares of their own stock. And Wall
Street is making more bets in the stock market with money it can borrow
at almost zero percent interest.
In other words, with Republicans in charge of the House, the economy
remains anemic. It may even succumb to another bubble that bursts.
Could it be that Republicans want to keep the economy this way through Election Day, 2012?
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