When Wall Street Rules, We Get Wall Street Rules
August 20, 2010 12:19 pm

Dean Baker

......Our income is a cost to the rich. They will look to cut it wherever they can, whether this is wages for private sector workers, pensions for public employees, or Social Security for retirees. That is their target.

We have to fight back using the same logic. Their income is our cost -- the multimillion dollar bonuses for the Wall Street wizards is a direct drain on the economy. So are the bloated paychecks of top executives and their lackey boards. Progressives must be prepared to use all the same tactics to bring down the income of the rich and powerful that they have used to reduce the income of everyone else.

This means restructuring the rules of corporate governance to put serious downward pressure on the pay of top executives. The highest paid workers (doctors, lawyers, and economists) must be subjected to international competition in the same way as manufacturing workers have been subjected to international competition. And, we should sharply limit the extent of the patent or copyright protections that are exploited by the drug industry and the entertainment and software industries.

We have to put the focus on the ways the rich have rigged the rules and place this at the center of political debate. The three decade-long battle over tax cuts for the rich is important, but at the end of the day it is a side show. If we let them steal all the money at the onset, it really doesn't make much difference if they end up letting us tax a little of it back.

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Lessons from FDR: When the Right Cries Wolf, Bite Back
August 15, 2010 10:26 pm

Peter Dreier and Donald Cohen

Alf Landon, the Kansas governor running as the Republican Party's 1936 presidential candidate, called it a "fraud on the working man" and "a cruel hoax." The New York Times, in an editorial, said it was "ill-considered" and "very questionable." Harper Sibley, the president of the U.S. Chamber of Commerce, warned that it would result in "more unemployment in the future, killing the goose that lays the golden eggs."

Congressman John Taber, a Republican from New York, proclaimed that "Never in the history of the world has any measure been brought here so insidiously designed as to prevent business recovery, to enslave workers and to prevent any possibility of the employers providing work for the people." His New York colleague, GOP Congressman Daniel Reed, warned that if it passed "the lash of the dictator will be felt." The American Medical Association denounced it as a "compulsory socialistic tax." Silas Strawn, former president of both the American Bar Association and the U.S. Chamber of Commerce, described it as "economically preposterous and legally indefensible." It was, he said, part of President Franklin D. Roosevelt's attempt to "Sovietize the country."

What was this threat to American prosperity, freedom, and democracy they were all decrying? It was Social Security, which President Roosevelt signed into law on August 14, 1935 -- 75 years ago.

At the time, the opponents of Social Security were not right-wing lunatics (the Depression-era cousins of today's Tea Party), but rather the business establishment and the mainstream of the Republican Party.

In the early years of the Depression, more than half of America's elderly lived in poverty. But most business leaders and conservatives considered the very idea that government had a moral responsibility to help senior citizens retire with dignity to be outrageously radical, a dangerous trampling of individual liberty.

In addition to ideological objections, opponents had economic ones. They predicted that the new Social Security tax would bankrupt the country and make it impossible to bring the economy out of the recession. The powerful National Association of Manufacturers said the "so-called Social Security will mean industrial in-security." Senator Daniel Hastings (R-Del) predicted that Social Security would "end the progress of a great country and bring its people to the level of the average European."

Opponents argued that Social Security was impractical, utopian, un-American, radical, and socialistic.

As the former Governor of New York, Roosevelt knew that the chambers of commerce, manufacturers associations, and other business groups had opposed the most important pieces of social legislation on that state's books, including the factory inspection law (passed as a result of the 1911 Triangle Shirt Waist factory fire that killed 146 women), the law limiting the hours of labor for women to fifty-four a week, unemployment insurance, pensions for the elderly, and public works projects to put people back to work......

....In retrospect, it is obvious that Social Security's Depression-era opponents engaged in fear-mongering, not economic reality. Their opposition was based on a free-market fundamentalist ideology that abhorred any attempt by reformers to utilize government to improve American's living conditions, working conditions, or public health.

In 1936, Landon and the Republican Party made the repeal of Social Security the centerpiece of their campaign. This year, GOP candidates for Congress are calling for repeal of the health care reform law enacted in March, using much of the same rhetoric.

Just like the early battle over Social Security wasn't really about old-age insurance, current fights over public policy are really place-holders for broader concerns. They are about what kind of country we want to be and what values we consider most important.

Indeed, business groups, Republicans, and right-wing zealots today not only oppose health care reform, but also tougher financial regulations, stronger workplace safety laws, policies to limit climate change, labor law reform, higher taxes on the rich, extension of unemployment insurance to the long-term jobless, and even providing medical benefits to the cops, firefighters and other 9/11 first-responders. The issues vary, but mantra is the same: This liberal (fill-in-the-blank) policy will kill jobs, undermine the entrepreneurial spirit, and destroy freedom.

The success of Social Security teaches us two important lessons....

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Third World America: Chronicling the Assault on America's Middle Class...and the Solutions
August 15, 2010 8:12 pm

Arianna Huffington

.....And it's not just about dismal unemployment figures and gloomy foreclosure numbers. As the New York Times reported last week, Hawaii has gone beyond laying off teachers and has begun laying off students -- closing its public schools on 17 Fridays during the last school year. In the Atlanta suburb of Clayton County, the entire bus system was shut down. Colorado Springs turned off over 24,000 of its streetlights. The Philadelphia Inquirer reports that Camden, New Jersey is soon to permanently shutter its entire library system. And last month the Wall Street Journal reported on the trend of cash-strapped states and counties giving up on the idea of maintaining paved roads, allowing them instead to turn back into gravel. And those localities that can't even afford to put gravel down are just letting the roads, as the Journal put it, "return to nature." A seminar at Purdue University on this trend was entitled "Back to the Stone Age."

Though the particulars of our country's transformation are painfully real to the rest of the country, Washington and Wall Street remain blind to our trajectory toward Third World status.

Witness the joint appearance on Fareed Zakaria's CNN show by former Treasury Secretaries Paul O'Neill and Robert Rubin. According to both of them, we don't need a second stimulus. "We are moving forward at a pretty gradual pace," said O'Neill, "but I don't think things are terrible." Is "not terrible" the new definition of success? And I don't doubt that things are not terrible for O'Neill -- in fact, I bet the roads leading to most of his houses are still paved.

As for Rubin, he "wouldn't do a major second stimulus, because I think...we run a risk that it could be counterproductive in creating a lot of additional uncertainty and undermining confidence."

Uncertainty? I guess that's true in the sense that the nearly 15 million people without a job are currently quite certain they don't have one; if a new stimulus bill were passed, there will at least be some welcome uncertainty as to whether they would be one of the lucky ones getting hired.

In Rubin's mind, what would create more "certainty" is -- drumroll, please -- deficit reduction. "I would try over the next six months to put in place a very serious beginning of deficit reduction that would take effect at some specified time in the future," he said. "I think that could do a lot for confidence."

As Duncan Black writes:

"Can someone get me some of the Very Serious Person crack rock so I can understand the very sophisticated economic model such that all that matters is 'confidence' and that confidence could be undermined by fiscal stimulus?"

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Cat Man Do
August 15, 2010 5:50 pm

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Going Dark
August 14, 2010 8:34 pm

Krugman

"But isn't keeping taxes for the affluent low also a form of stimulus? Not so you'd notice. When we save a schoolteacher's job, that unambiguously aids employment; when we give millionaires more money instead, there's a good chance that most of that money will just sit idle....

....How did we get to this point? It's the logical consequence of three decades of antigovernment rhetoric, rhetoric that has convinced many voters that a dollar collected in taxes is always a dollar wasted, that the public sector can't do anything right.

The antigovernment campaign has always been phrased in terms of opposition to waste and fraud - to checks sent to welfare queens driving Cadillacs, to vast armies of bureaucrats uselessly pushing paper around. But those were myths, of course; there was never remotely as much waste and fraud as the right claimed. And now that the campaign has reached fruition, we're seeing what was actually in the firing line: services that everyone except the very rich need, services that government must provide or nobody will, like lighted streets, drivable roads and decent schooling for the public as a whole...."

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