The Big Economic Story; Why Obama Isn’t Telling It

tax cuts for the richQuiz: What’s responsible for the lousy economy most Americans continue to wallow in?

A. Big government, bureaucrats, and the cultural and intellectual elites who back them.

    B. Big business, Wall Street, and the powerful and privileged who represent them.

      These are the two competing stories Americans are telling one another.

      Yes, I know: It’s more complicated than this. In reality, the lousy economy is due to insufficient demand – the result of the nation’s almost unprecedented concentration of income at the top. The very rich don’t spend as much of their income as the middle. And since the housing bubble burst, the middle class hasn’t had the buying power to keep the economy going. That concentration of income, in turn, is due to globalization and technological change – along with unprecedented campaign contributions and lobbying designed to make the rich even richer and do nothing to help average Americans, insider trading, and political bribery.

      So B is closer to the truth.

      But A is the story Republicans and right-wingers tell. It’s a dangerous story because it deflects attention from the real problem and makes it harder for America to focus on the real solution – which is more widely shared prosperity. (I get into how we might do this in my new book, Aftershock.)

      A is also the story President Obama is telling, indirectly, through his deficit commission, his freeze on federal pay, his freeze on discretionary spending, and his waivering on extending the Bush tax cuts for the rich.

      Most other Washington Democrats are falling into the same trap.

      If Obama and the Democrats were serious about story B they’d at least mention it. They’d tell the nation that income and wealth haven’t been this concentrated at the top since 1928, the year before the Great Crash. They’d be indignant about the secret money funneled into midterm campaigns. They’d demand Congress pass the Disclose Act so the public would know where the money comes from.

      They’d introduce legislation to curb Wall Street bonuses – exactly what European leaders are doing with their financial firms. They’d demand that the big banks, now profitable after taxpayer bailouts, reorganize the mortgage debt of distressed homeowners. They’d call for a new WPA to put the unemployed back to work, and pay for it with a tax surcharge on incomes over $1 million.

      They’d insist on extended unemployment benefits for long-term jobless who are now exhausting their benefits. And they’d hang tough on the Bush tax cuts for the wealthy – daring Republicans to vote against extending the cuts for everyone else.

      But Obama is doing none of this. Instead, he’s telling story A.

      Making a big deal out of the deficit – appointing a deficit commission and letting them grandstand with a plan to cut $4 trillion out of the projected deficit over the next ten years — $3 of government spending for every $1 of tax increase – is telling story A.

      What the public hears is that our economic problems stem from too much government and that if we reduce government spending we’ll be fine.

      Announcing a two-year freeze on federal salaries – explaining that “I did not reach this decision easily… these are people’s lives” – is also telling story A.

      What the public hears is government bureaucrats are being paid too much, and that if we get the federal payroll under control we’ll all be better off.

      Proposing a freeze on discretionary (non-defense) spending is telling story A. So is signaling a willingness to extend the Bush tax cuts to the top. So is appointing his top economic advisor from Wall Street (as apparently he’s about to do).

      In fact, the unwillingness of the President and Washington Democrats to tell story B itself promotes story A, because in the absence of an alternative narrative the Republican story is the only one the public hears.

      Obama’s advisors explain the President’s moves are designed to “preempt” the resurgent Republicans – just like Bill Clinton preempted the Gingrich crowd by announcing “the era of big government is over” and then tacking right.

      They’re wrong. By telling story A and burying story B, the President legitimizes everything the right has been saying. He doesn’t preempt them; he fuels them. He gives them more grounds for voting against raising the debt ceiling in a few weeks. He strengthens their argument against additional spending for extended unemployment benefits. He legitimizes their argument against additional stimulus spending.

      Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn’t legitimize the Republican world view. Obama doesn’t have that luxury. The American public is still hurting and they want to know why.

      Robert ReichUnless the President and Democrats explain why the economy still stinks for most Americans and offer a plan to fix it, the Republican explanation and solution – it’s big government’s fault, and all we need do is shrink it – will prevail.

      That will mean more hardship for tens of millions of Americans. It will make it harder to remedy the bad economy. And it will set Republicans up for bigger wins in the future.

      Robert Reich

      Republished with permission.

      Published by the LA Progressive on December 2, 2010
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      About Robert Reich

      Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.

      Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

      Comments

      1. Adam Eran says:

        Sadly, Reich is completely correct. The only surprise is that people still expect Bush 44…er, I mean Obama, to do anything progressive.

      2. Obama should televise the voting and meetings on cutting taxes for the rich. He should televise each politician reading out loud who their campaign contributions came from and what companies ran negative ads against their opponents.

        Most of all Obama needs to start putting Rattner, and other SEC criminals in prison. Take away ALL their money, and make sure future CEO’s etc.. know they can and will be in prison, and have their ill gotten gains taken away. Start with taking away the pension and benefits that tax payers have to fork out for Charlie Rangel.

        NO more ‘deals’ for politicians found guilty of taking bribes, or kickbacks.

        Obama needs to play reeeeeeally tough with Boehner or he is going to eat him up and spit him out.

        I didn’t start looking in the news for corruption until I voted for Obama. Now I can’t quit finding it everywhere, and no consequences.

      3. Obama is a stealth republican. We’ve been had, Democrats.

        Or maybe both parties are now just the two wings of the Corporatocratic Party.

        When will the people revolt?

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